2024 (12) TMI 271 - AT - Central Excise

Recovery of Cenvat Credit wrongly availed and utilized along with interest under Rule 14 of the Cenvat Credit Rules, 2004 read with Sections 11A and 11AB of the Central Excise Act, 1944 and penalty - seeking demand of central excise duty in cash on the pet bottles on the ground that the appellant had cleared the goods captively during the period August, 2008 to May, 2010 - invocation of Extended period of limitation - HELD THAT - The appellant was manufacturing pet bottles in their factory since August 2008 for captive consumption but was not paying the duty on the same and did not get the registration of the same; but in June 2010 they came to know that they are liable to pay duty and then informed the Department regarding the liability to pay duty and subsequently paid the duty for the period August, 2008 to June, 2010 out of the Cenvat Credit on inputs and capital goods and also paid the interest of Rs.8,84,585/- in cash and intimated the same to the Department vide their letters dated 13.06.2010 and 23.06.2010. The appellant also paid some amount as demanded by the Department along with interest which is not disputed. When the appellant paid the duty along with interest voluntarily and the same was not disputed by the Department, then as per the provisions of sub-section (2B) of Section 11A of the Central Excise Act, 1944, there was no necessity to issue the Show Cause Notice - Department has wrongly relied on the provisions of Rule 8(3A) of the Central Excise Rules, 2002, because Rule 8(3A) is applicable in cases where assessees are otherwise paying duty but for certain reasons commit default in not paying duty by due date. Also, the benefit of credit cannot be denied if subsequently duty is held to be payable on the final product. Time Limitation - suppression of facts or not - HELD THAT - In the present case, there is no suppression on the part of the appellant as the appellant voluntarily informed the Department vide their letter dated 17.06.2010 and subsequently paid the duty along with interest also; whereas the Show Cause Notice was issued after the expiry of more than two years which is time barred, because the ingredients for invoking the extended period of limitation do not exist in the present case. Penalty under Rule 26 on Personal Penalty on Authorized Signatory (Individual) - HELD THAT - Imposition of penalty is also bad in law because the ingredients for imposition of penalty under Rule 26 do not exist in the present case. The impugned order is not sustainable in law, therefore the same is set aside by allowing both the appeals.

Summary

Issues:
Recovery of Cenvat Credit and penalty imposition under Cenvat Credit Rules, 2004; Demand of central excise duty and penalty imposition under the Central Excise Act, 1944; Imposition of penalty on the authorized signatory under Central Excise Rules, 2002.

Analysis:
The appeals challenged an order confirming demands for Cenvat Credit recovery, penalty imposition, central excise duty demand, and penalties under various rules. The appellant, a distillery, had not paid duty on pet bottles used for filling alcoholic liquor, believing no duty was required for captive use. Upon realizing the duty liability, the appellant voluntarily informed the Department, paid the duty from Cenvat Credit, and complied with subsequent requirements. The Department issued a show cause notice invoking extended limitation, which the Adjudicating Authority upheld.

The appellant argued that the impugned order lacked legal sustainability, as they voluntarily disclosed the duty liability and paid it, precluding the need for a show cause notice under Section 11A(2B). They contended that Rule 8(3A) was inapplicable, citing High Court judgments declaring it ultra vires. The appellant emphasized precedents supporting Cenvat Credit entitlement even if subsequent duty is payable on the final product.

Regarding limitation, the appellant claimed the demand was time-barred, having informed the Department voluntarily more than two years before the show cause notice. They challenged the penalty on the authorized signatory, asserting a lack of mens rea and legal grounds for penalty imposition under Rule 26.

The Revenue representative supported the impugned order, alleging the appellant's suppression of material facts to evade duty payment. They cited the decision in UOI vs. Rajasthan Spinning & Weaving Mills and upheld the denial of Cenvat Credit and central excise duty demand.

The Tribunal found the appellant had rectified the duty non-payment, paid voluntarily, and the Department did not dispute it. They concluded that the show cause notice was unnecessary under Section 11A(2B). The Tribunal also held Rule 8(3A) inapplicable, citing its invalidation by High Courts. They emphasized the appellant's entitlement to Cenvat Credit based on established legal principles. The Tribunal ruled the demand time-barred due to voluntary disclosure and absence of suppression, setting aside the penalties imposed under Rule 26.

In summary, the Tribunal deemed the impugned order legally unsustainable, allowing both appeals in favor of the appellant.

(Order pronounced in the open court on 05.12.2024)