2019 (10) TMI 166 - AT - Central Excise

Demand u/s 11D - collection of reversal of CENVAT Credit from the customers - whether the assessee has unjustly benefited and enriched - Rule 6 of the CENVAT Credit Rules, 2004 - extended period of limitation - HELD THAT - It has been admitted in the impugned order that the appellant has debited or reversed the duty at the end of the month which was collected from the principal manufacturers. In view of the reversal of the duty collected from the principal manufacturers, it is found that there is no amount that has been collected from the customers and retained by the appellant which would attract Section 11D of the Central Excise Act, 1944. In fact, invoking Section 11D(1A) of the Central Excise Act, 1944 in the facts and circumstances of the case is not justified when the appellants have collected only the amount of CENVAT admittedly debited, and the said amount is not retained by the appellant. Further, by following the ratio of the decisions in the case of M/S LAMICOAT INTERNATIONAL PVT. LTD., SHRI LOK NATH PRASAD GUPTA, DIRECTOR, SHRI OM PRAKASH GUPTA, DIRECTOR, SHRI DIPANKAR GHOSH, MANAGER VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA 2015 (9) TMI 679 - CESTAT NEW DELHI and in the case of COMMISSIONER OF CENTRAL EXCISE, BHOPAL VERSUS SS. CROP CARE LTD. 2010 (4) TMI 932 - CESTAT NEW DELHI , it is held that invoking Section 11D to demand the amount is not sustainable in law. Extended period of limitation - HELD THAT - When the Revenue has not brought any evidence on record to show that there was suppression on the part of the appellant with intent to evade payment of duty, the appellant has shown invoice-wise detail of CENVAT in ER-1 returns and the copies of the invoices and ER-1 returns are also on record. Show-cause notice was issued on 6.12.2013 demanding an amount of ₹ 10,42,791/- for the period from April 2009 to October 2012 which is entirely barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of appeal by Commissioner (A) regarding reversal of CENVAT credit on input Zinc used in exempted job work activity.

Analysis:
The appellant, engaged in manufacturing transformer radiators, was audited by the Internal Audit Party of the Department. It was observed that the appellant availed CENVAT credit on Zinc used for galvanization in both dutiable finished goods and exempted job work activity without maintaining separate accounts. The Department alleged that the appellant unjustly benefited by collecting CENVAT credit from customers while retaining the same amount. A show-cause notice was issued, resulting in a demand of ?10,42,791 under Section 11D of the Central Excise Act, 1944, and a penalty of ?5,000 imposed. The Commissioner (A) upheld the demand, leading to the present appeal.

The appellant contended that they were entitled to CENVAT credit on Zinc used for job work, citing judicial precedents. They argued that the duty was paid on the final product by the principal manufacturer, justifying their availing of CENVAT credit. The appellant maintained that they had reversed the duty collected from principal manufacturers, disputing the demand under Section 11D(1A) of the Act. They further argued that the demand was time-barred as the show-cause notice was issued beyond the limitation period.

The Tribunal found in favor of the appellant, noting that the appellant had reversed the duty collected from principal manufacturers and had not retained any amount collected from customers. The Tribunal held that invoking Section 11D of the Act was unjustified as the appellant had debited or reversed the duty at the end of each month. Relying on relevant case laws, the Tribunal concluded that the demand was not sustainable in law. Additionally, the Tribunal held that the demand was time-barred as there was no evidence of suppression by the appellant to evade duty payment.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal of the appellant on both merit and limitation grounds, providing consequential relief.