2018 (11) TMI 9 - AT - Central Excise

Penalty u/s 11AC - short levy or non-levy of paper cess or education cess - N/N. 4/2006-CE dated 01.03.2006 - final product is exempted from payment of basic duty of excise - Held that - Since the appellant s final product was fully exempt from payment of duty, they could have entertained a bonafide belief that the same does not attract any duty also on account of cess or education cess. In the absence of any evidence to the contrary, no malafide can be attributed to them so as to impose any penalty. Suppression of facts or not? - Held that - Admittedly, the appellant was enjoying the exemption for the first clearance upto 3500 MT and this fact was in the knowledge of the revenue as also being reflected in the returns. Mere non mention of the Notification number would not make the assessee guilty of any suppression or misstatement with the malafide intention to evade taxes - it cannot be said that the said availment of credit was with any malafide intention. Part of the demand is within the limitation period, which is upheld alongwith interest - penalty set aside - appeal allowed in part.

Summary

Issues:
1. Availment of cenvat credit on exempted final product
2. Non-payment of paper cess and education cess
3. Show-cause notice for cenvat credit availed and cess amounts
4. Adjudication by original authority and Commissioner (Appeals)
5. Imposition of penalty under Section 11AC
6. Challenge before the Appellate Tribunal
7. Contesting the penalty and reversal of cenvat credit
8. Limitation period for demand raised
9. Reversal of credit and agreement on repayment
10. Benefit of limitation on demand and penalty
11. Appeal decision and quantification of interest within limitation

Analysis:
1. The appellant, a manufacturer of paper products, availed cenvat credit despite the final product being exempted from duty, leading to a show-cause notice for availing credit of &8377; 13,23,451 during March 2008 to February 2009. The appellant reversed the credit upon objection by the revenue.

2. The appellant did not pay paper cess and education cess on the exempted final product, resulting in a show-cause notice proposing confirmation of these amounts along with interest and penalty. The original authority dropped the demand related to cenvat credit but did not confirm the cess amounts. The Commissioner (Appeals) reversed this decision and confirmed the denial of credit, interest, and penalty, as well as the paper cess and education cess.

3. The Appellate Tribunal heard the challenge against the Commissioner (Appeals) decision. The appellant did not contest the cess amounts but argued against the penalty under Section 11AC of the Central Excise Act, citing a High Court judgment and the absence of evidence of malafide intention.

4. The Tribunal acknowledged the absence of a provision for penalty in the case of short levy or non-levy of cess under Section 11AC. Considering the appellant's belief due to the exemption and lack of malafide intention, the penalty was set aside while confirming the cess amounts.

5. Regarding the reversal of cenvat credit, the appellant admitted the mistake and agreed to repay the amount but argued that the demand, based on figures in ER 1 returns, was time-barred. The Tribunal found no merit in the Commissioner (Appeals) reasoning and set aside the order, noting the exemption and lack of malafide intention.

6. The Tribunal partially allowed the appeal, setting aside the penalty and interest while upholding the credit reversal. The appellant agreed to pay interest within the limitation period. The decision was made to quantify and recover the interest amount falling within the limitation period from the appellant.