2019 (10) TMI 491 - AT - Central Excise

Short payment of duty - Rule 3(5) of Cenvat Credit Rules - demand of differential duty alongwith equal amount of penalty - HELD THAT - The appellant had submitted detailed calculation on the basis of bills of entry under which the inputs were procured and invoices under which the inputs were sold as such. According to the appellant, the correct duty amount is ₹ 9,77,045/-. The Adjudicating Authority obtained report from the field formation however, the report was obtained at the back of the appellant after concluding the hearing. Since in the report also there is difference of ₹ 1,27,774/- it was incumbent on the Adjudicating Authority to provide a copy of the report and seek explanation from the appellant, which the Adjudicating Authority has failed to do - thus, there is a clear violation of natural justice. The matter needs reconsideration for calculation of amount of duty as well as penalty imposed under Section 11AC - appeal allowed by way of remand.

Issues:
Calculation of differential duty amount and penalty under Section 11AC based on Cenvat credit rules.

Analysis:
The case involved a dispute regarding the calculation of duty amount and penalty under Section 11AC based on the Cenvat credit rules. The appellant had received inputs for manufacturing final products, paying CVD and SAD, and availed Cenvat credit. Some inputs were sold as is, with duty paid on the transaction value, resulting in a shortfall in duty payment per Rule 3(5) of the Cenvat Credit Rules. A show cause notice was issued demanding duty payment of ?11,04,819 based on an audit objection. The appellant paid ?9,77,045, leaving a difference of ?1,27,774 between the department's and appellant's calculations. The Adjudicating Authority confirmed the demand and imposed an equal penalty under Section 11AC, considering the shortfall and the amount paid before the notice. The Commissioner (Appeals) upheld the decision, leading to the present appeal.

The appellant argued that they had paid ?9,77,045 along with interest before the notice, contesting the correctness of the ?11,04,819 demanded. They claimed their calculation was based on bills of entry and invoices, highlighting a lack of access to reports obtained post-hearing, alleging a violation of natural justice. The appellant asserted no malafide intent or suppression of facts, as the duty was paid based on transaction value, supported by proper documentation and ER-1 returns. They contended that penalty under Section 11AC was unwarranted due to the absence of factual suppression.

The Revenue representative reiterated the demand and penalty, emphasizing the differential between the demanded amount and the paid sum, arguing against dropping the penalty due to the audit-based case and lack of voluntary payment before departmental intervention. The Tribunal reviewed both sides' contentions, noting the appellant's challenge to the ?1,27,774 differential duty and the penalty under Section 11AC. They observed discrepancies in the duty calculation and the post-hearing report, criticizing the Adjudicating Authority for not providing the report to the appellant for explanation, thereby breaching natural justice principles. Consequently, the Tribunal set aside the impugned order, remanding the case to the Adjudicating Authority for a fresh decision, ensuring the appellant receives a fair opportunity to present their case and address the duty and penalty calculations accurately.

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