2010 (4) TMI 341 - AT - Central Excise

SSI Exemption- Notification No. 8/03-C.E.- In this case department notice that the Appellant violated the conditions of SSI exemption Notification No. 8/03-C.E., they would not be eligible for duty exemption in respect of their first Rs. One Crore, thus issue Show cause Notice for recovery of duty and imposed penalty and pass the order for confiscation of goods. Held that- excess credit debited by assesseee making credit taken by mistake equal to their credit entitlement under Rule 3(2) of Cenvat Credit Rules, 2004 when starting paying duty. Debit entry not utilization of wrongly taken credit. Credit entries during period of exemption due to bonafide mistake subsequently rectified. SSI exemption not to be denied.

Issues:
1. Whether the Appellant wrongly availed input duty Cenvat credit during the period of SSI exemption.
2. Whether the Appellant is eligible for exemption under Notification No. 8/03-C.E.
3. Validity of penalties imposed under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002.
4. Compliance with procedural requirements in the adjudication process.

Issue 1:
The Appellant was accused of wrongly availing input duty Cenvat credit during the period of SSI exemption. The Department found discrepancies in the Cenvat credit amounting to Rs. 9,34,306/- taken by the Appellant during the period from 1-4-06 to 15-6-06. The Appellant argued that the credit entries were made due to a mistake by their clerk and were not utilized. The Tribunal accepted the contention that the Cenvat credit was taken inadvertently and rectified when the Appellant switched to a duty-paying status. The Tribunal found that the Appellant's actions were a bona fide mistake and not intentional, thereby allowing the benefit of SSI exemption.

Issue 2:
The question arose regarding the Appellant's eligibility for exemption under Notification No. 8/03-C.E. The Appellant had crossed the one crore limit on 15-6-06 while availing full duty exemption. The Department contended that since input duty credit had been taken during the exemption period, the Appellant violated the conditions of the notification and should not be eligible for exemption. However, the Tribunal held that the Appellant's actions were unintentional and rectified promptly, thus allowing the benefit of SSI exemption under the notification.

Issue 3:
Penalties were imposed on the Appellant under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002. The Tribunal found that the penalties were imposed based on the erroneous assumption that the Appellant intentionally violated the exemption conditions. As the Tribunal ruled in favor of the Appellant regarding the mistaken Cenvat credit, the penalties were deemed unjustified and set aside.

Issue 4:
The procedural aspect of the adjudication process was also scrutinized. The Tribunal reviewed the records and submissions from both sides. It was noted that the Appellant had duly declared the Cenvat credit in their ER-I returns, and the Department discovered the discrepancy only through scrutiny. The Tribunal found that the Appellant's rectification of the mistake upon switching to a duty-paying status was in compliance with the relevant rules, leading to the conclusion that the denial of SSI exemption was unwarranted. The impugned order was set aside, and the appeal was allowed.

---

← Previous Next →