2004 (8) TMI 305 - AT - Central Excise

Summary

Issues:
Manufacture of exempted goods, reversal of credit, clerical errors in debit entry, utilization of credit, applicability of Section 11B, duty liability on gold bars, permission for clerical corrections, penalty imposition.

Manufacture of Exempted Goods and Reversal of Credit:
The appellants, manufacturers of copper electrodes and cast copper rods, avail credit of duty paid on inputs. They reverse 8% amount equivalent to the sale value of fully duty exempted gold and silver bars. A clerical error in the debit entry led to an excess debit of Rs. 1.584 crores, which was corrected by a credit entry in the PLA. The department proposed to recover this credit, citing that credit can only be availed in PLA for amounts paid by TR-6 challan. The Commissioner held that the 8% amount debited and credit taken was considered as duty, hence the refund claim was barred by limitation under Section 11B.

Duty Liability on Gold Bars and Applicability of Section 11B:
The Commissioner's order extended beyond the show cause notice, addressing the dutiability of gold bars not initially raised in the notice. The Tribunal held that such an order is legally flawed, following established judgments. The Tribunal emphasized that the 8% reversal is not a specified duty but a percentage of exempted goods' value. Equating this with duty and applying Section 11B was deemed incorrect. The Tribunal supported the appellants' reliance on relevant case law to contest this issue.

Permission for Clerical Corrections and Penalty Imposition:
The Tribunal clarified that there is no requirement in Cenvat Rules for specific permission to correct clerical errors in ledgers. The appellants' correction of errors in PLA was considered a valid exercise in maintaining accurate accounts. The Tribunal highlighted that the penalty imposed was unwarranted, as the corrections made were in line with accounting practices. The Tribunal emphasized that cross entries to correct errors are standard accounting practices and cannot be denied based on incorrect interpretations of PLA maintenance.

In conclusion, the Tribunal set aside the demand and penalty imposed, ruling in favor of the appellants. The order highlighted the importance of adhering to legal procedures and accounting practices, emphasizing that clerical errors should be rectified without penal consequences.