2022 (11) TMI 1538 - AT - Central Excise

Recovery of erroneous rebate with interest and penalty - misutilisation of Advance Licence Scheme by mis- declaring their export goods as Catalysts of Palladium and Platinum - extended period of limitation - Admissibility of the CENVAT Credit. Recovery of erroneous rebate - HELD THAT - Admittedly goods were exported as per the provisions of the Rule under claim for rebate by following the procedure as prescribed by the notification. Appellants had filed 27 ARE-1 s against which the export goods were cleared by them and subsequently after export of the said goods the rebate claims were filed in the prescribed manner. These rebate claims were allowed in their favour. There is no dispute that the goods which were cleared under the ARE-1 s were not exported and diverted elsewhere. The facts as recorded in the order acknowledge the fact of actual shipment of these goods. It is also not in dispute that these goods were cleared on payment of the duty which has been sought to be rebated after the export of the said goods. The facts that the goods cleared were exported is enough to allow the claim of rebate in the favour of the appellants. Admittedly there was misdeclaration of the description of the goods on the export documents to the effect that the goods were declared as Platinum/ Palladium supported catalyst instead of Ash and Residue . This misdeclaration resulted in appellants claiming certain benefits under the Advance License DEEC Scheme. As per this scheme against the exports made appellant obtained Advance Licenses for import of duty free precious metals and imported duty free material against these licenses during the period from December 2003 to June 2008. Extended period of limitation - HELD THAT - All the facts were in the knowledge of the department and the goods were cleared for export in manner as provided by the Notification after due examination. In such a situation there cannot be any justification for invocation of extended period of limitation for making this demand. Admissibility of the CENVAT Credit - HELD THAT - There are no merits in the said arguments as that was not even the issue in the show cause notice nor have been adjudicated by the impugned order. Further in case if the revenue intended to proceed against the appellants for recovery of inadmissible CENVAT Credit then the proper course would have been to initiate the proceedings as provided by the Rule 14 of the Cenvat Credit Rules 2004. Conclusion - i) The mis-declaration of the goods Ash and Residues under the description Platinum/Palladium supported catalysts in the 27 ARE-1 s and Shipping Bills is proved beyond doubt. ii) The recovery of erroneous rebates upheld penalties imposed for mis-declaration. iii) There are no merits in the demand made demand of interest and imposition of penalty set aside. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal questions:

Whether the appellant exported Palladium/Platinum supported catalysts or mis-declared Ash and Residues, and if the mis-declaration is sustainable.
If mis-declaration is accepted, whether the rebate of excise duty sanctioned on the mis-declared goods was in order.
Whether the extended period for recovery can be invoked.
Whether the goods are liable for confiscation and whether penalties are applicable for mis-declaration to avail erroneous rebate.
Whether penalties are applicable for not accounting the export product "Ash and Residues" in the Daily Stock Register.
Whether penalties are applicable to the General Manager under Rule 26 and/or Rule 27 of the Central Excise Rules, 2002.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Mis-declaration of Export Goods

Relevant Legal Framework and Precedents: The case involves the Central Excise Act, 1944, and related rules and notifications. The court refers to various precedents regarding mis-declaration and rebate eligibility.
Court's Interpretation and Reasoning: The court found that the appellant exported "Ash and Residues" instead of the declared "Palladium/Platinum supported catalysts." The internal records and statements from company officials confirmed the mis-declaration.
Key Evidence and Findings: Assay Analysis Reports and statements from company officials indicated that the exported goods were "Ash and Residues," not catalysts.
Application of Law to Facts: The court held that the mis-declaration was proven and that the appellant could not claim a rebate for goods that were not exported as declared.
Treatment of Competing Arguments: The appellant argued that the presence of precious metals in the ash justified the declaration. The court rejected this, stating that the goods remained "Ash and Residues."
Conclusions: The court concluded that the mis-declaration was proven beyond doubt.

Issue 2: Rebate of Excise Duty on Mis-declared Goods

Relevant Legal Framework and Precedents: Rule 18 of the Central Excise Rules, 2002, and Notification No. 19/2004-CE (NT) were considered.
Court's Interpretation and Reasoning: The court found that the rebate was erroneously granted as the goods exported were not as declared.
Key Evidence and Findings: The court relied on the earlier finding of mis-declaration to determine that the rebate was not justified.
Application of Law to Facts: Since the goods exported were not as declared, the rebate of duty paid on the declared goods was not permissible.
Treatment of Competing Arguments: The appellant's argument that duty paid should be rebated regardless of mis-declaration was rejected.
Conclusions: The court held that the rebate sanctioned was erroneous and recoverable.

Issue 3: Invocation of Extended Period for Recovery

Relevant Legal Framework and Precedents: Section 11A of the Central Excise Act, 1944, governs the recovery of erroneous rebates.
Court's Interpretation and Reasoning: The court found that the mis-declaration was intentional, justifying the invocation of the extended period for recovery.
Key Evidence and Findings: The court noted that the mis-declaration was discovered during investigations, not by the appellant's internal review.
Application of Law to Facts: The court held that the extended period was applicable due to the intentional nature of the mis-declaration.
Treatment of Competing Arguments: The appellant's claim of voluntary disclosure was dismissed as an afterthought.
Conclusions: The extended period for recovery was deemed applicable.

Issue 4: Confiscation and Penalties for Mis-declaration

Relevant Legal Framework and Precedents: Rule 25 of the Central Excise Rules, 2002, addresses penalties for non-compliance.
Court's Interpretation and Reasoning: The court found the appellant liable for penalties due to the mis-declaration.
Key Evidence and Findings: The lack of proper accounting for the exported goods in the Daily Stock Register supported the imposition of penalties.
Application of Law to Facts: The court applied the relevant rules to determine the appellant's liability for penalties.
Treatment of Competing Arguments: The appellant's arguments against penalties were rejected based on the evidence of mis-declaration.
Conclusions: Penalties were imposed for the mis-declaration and failure to maintain proper records.

Issue 5: Penalties for Not Accounting Export Products

Relevant Legal Framework and Precedents: Rule 25 of the Central Excise Rules, 2002, requires proper record-keeping.
Court's Interpretation and Reasoning: The court found that the appellant failed to account for "Ash and Residues" in the Daily Stock Register, warranting penalties.
Key Evidence and Findings: The absence of "Ash and Residues" in the Daily Stock Register was a key factor in the court's decision.
Application of Law to Facts: The court applied Rule 25 to impose penalties for non-compliance with record-keeping requirements.
Treatment of Competing Arguments: The appellant's defense was insufficient to counter the evidence of non-compliance.
Conclusions: Penalties were justified for failing to account for the exported goods.

Issue 6: Penalties on the General Manager

Relevant Legal Framework and Precedents: Rule 26 and/or Rule 27 of the Central Excise Rules, 2002, address individual liability for non-compliance.
Court's Interpretation and Reasoning: The court imposed penalties on the General Manager for involvement in the mis-declaration.
Key Evidence and Findings: Statements from company officials implicated the General Manager in the mis-declaration.
Application of Law to Facts: The court applied the relevant rules to hold the General Manager liable for penalties.
Treatment of Competing Arguments: The defense arguments were insufficient to absolve the General Manager of liability.
Conclusions: Penalties were imposed on the General Manager for his role in the mis-declaration.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The mis-declaration of the goods 'Ash and Residues' under the description 'Platinum/Palladium supported catalysts' in the 27 ARE-1's and Shipping Bills is proved beyond doubt."
Core Principles Established: Mis-declaration of export goods invalidates rebate claims; intentional mis-declaration justifies extended recovery periods and penalties.
Final Determinations on Each Issue: The court upheld the recovery of erroneous rebates, imposed penalties for mis-declaration and record-keeping failures, and held the General Manager liable for penalties.

The judgment comprehensively addresses the issues of mis-declaration, rebate eligibility, and penalties, reinforcing the importance of accurate declarations and compliance with excise regulations.

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