2024 (8) TMI 780 - AT - Central Excise

Extended period of limitation - CENVAT Credit - Penalties under Rule 26 of Central Excise Rules - Classification of goods - crystalis glass - polished marble slabs - to be classified under CETSH70169000 and CETSH 68022110 or under CETSH 25151220 and 25151290 respectively?. Extended period of limitation - HELD THAT - It is apparent from the facts of preceding paras that the appellant has paid duty at his own volition and same has been declared in ER-1 return in the month of January 2008. The visiting officers were also informed about this very fact. In view of this fact, it is found that department was fully aware about the payment of differential amount of duty and therefore there are no reason for invoking extended time proviso for demanding duty under Section 11A of the Central Excise Act, 1944. In view of this the demand Central Excise duty is barred by period of limitation and therefore, the demand on this ground not sustainable. CENVAT Credit - HELD THAT - It is matter of record that the Cenvat credit on CVD was availed by the appellant on the basis of valid import documents namely bills of entry. The availment of Cenvat credit on a later date then receipt of duty paid inputs in the factory premises is not a bar under the provisions of Cenvat Credit Rules, 2004. In this regard, reliance placed upon this Tribunal decision in the case of STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF C. EX., RAIPUR 2001 (1) TMI 144 - CEGAT, NEW DELHI where it was held that ' credit taken beyond six months period prior to 29-6-1995 was not to be reversed.' Penalties imposed on the partners and employees of the appellant under Rule 26 of Central Excise Rules, 2002 - HELD THAT - It is matter of record that goods which have been manufactured and cleared by the appellant were duty paid though they have been classified wrongly under different Chapter heading however this being a matter of interpretation and further since the mistake has been corrected by them at the later stage by paying differential amount of duty, the very fact that the goods were cleared on payment of duty and on valid invoices therefore invoking penal provision under Rule 26 of Central Excise Rules, 2002 is legally not justifiable - the imposition of penalty on the partners and employees of the appellant is legally not sustainable and the same is set aside. The impugned order-in-original is legally not sustainable and is set aside - appeal allowed.

Summary

Issues:
Classification of marble tiles, Time limitation for show cause notice, Cenvat credit availment, Penalties under Rule 26 of Central Excise Rules

Classification of Marble Tiles:
The main issue in this case revolved around the correct classification of marble tiles manufactured by the appellant. The appellant initially classified the marble tiles under a specific category and paid duty accordingly. However, upon inspection by Revenue department officers, it was pointed out that the classification was incorrect, leading to the demand for a differential duty amount. The appellant rectified the classification and paid the differential duty, which was duly declared in their ER-1 return. The Tribunal found that the department was fully aware of the correction made by the appellant, and there was no basis for invoking the extended time proviso under Section 11A of the Central Excise Act, 1944. Consequently, the demand for Central Excise duty was deemed barred by the period of limitation.

Time Limitation for Show Cause Notice:
The appellant argued that the show cause notice issued by the department was beyond the period of limitation as they had voluntarily paid the differential duty and declared it in their ER-1 return. The appellant contended that the normal period of demand under Section 11A of the Central Excise Act, 1944 is one year, and since the department was aware of the correction made by the appellant, the extended time proviso should not have been invoked. The Tribunal agreed with the appellant, ruling that the demand for Central Excise duty was indeed barred by the period of limitation.

Cenvat Credit Availment:
Another issue raised in the case was the availment of Cenvat credit by the appellant on imported raw materials used in manufacturing the finished products. The appellant had availed Cenvat credit on the basis of valid duty paying documents, with a portion of the credit taken immediately upon receipt of the raw materials and the balance availed at a later date. The Tribunal held that there was no time limit prescribed under Rule 4 of the Cenvat Credit Rules, 2004, barring the appellant from availing the credit at a later stage. Citing relevant case law and CBEC Circular, the Tribunal upheld the appellant's right to avail Cenvat credit even after a certain period.

Penalties under Rule 26 of Central Excise Rules:
The department had imposed penalties on the partners and employees of the appellant under Rule 26 of the Central Excise Rules, 2002. The Tribunal found that since the goods manufactured and cleared by the appellant were duty paid, albeit under a wrong classification initially, and the mistake was rectified by paying the differential duty, invoking penal provisions under Rule 26 was not justified. Therefore, the Tribunal set aside the penalties imposed on the partners and employees of the appellant.

In conclusion, the Tribunal held that the impugned order-in-original was legally unsustainable, and the appeals filed by the appellant and co-appellants were allowed.