2013 (3) TMI 279 - AT - Central Excise

MODVAT/CENVAT credit on inputs - Removal as such without payment of duty - Recovery u/s 11D - Penalty u/s 11AC - extended period of limitation - held that - assessees that they cannot be held guilty of suppression or misstatement as regards non-reversal of credit for the reason that they are handling vast quantity of steel every year for manufacturing activities and issuing approximate quantities to sub-contractors, who are executing the works within the factory. - it was not practically possible to expunge the credit as and when the materials are issued to civil works. - No penalty u/s 11AC - However, penalty of Rs. 10,000/- is upheld as the assessees had not submitted relevant details in their monthly return. - Partly in favor of assessee Demand u/s 11D - recovery of cenvat credit reversed - held that - in the light of the decision of the Larger Bench of the Tribunal in Unison Metals Ltd. v. Commissioner of Central Excise, Ahmedabad - 2006 (10) TMI 171 - CESTAT, NEW DELHI , Section 11D is not applicable since the amount of 8% or 10% has already been paid to the Revenue and no amount is retained by the assessee. - Decided in favor of assessee.

Summary

Issues:
1. Availing MODVAT/CENVAT credit on inputs.
2. Clearing MODVAT/CENVAT credit-availed inputs to sister units and civil works.
3. Duty liability on clearances without payment.
4. Exemption eligibility under Notification No. 10/2007-C.E.
5. Recovery of amount collected from customers.
6. Adjudication of penalties and interest.
7. Applicability of Section 11D for excess duty collection.

Analysis:
1. The case involved the availing of MODVAT/CENVAT credit on inputs by the manufacturer, which was noticed during a visit by officers. The rules under CENVAT Credit Rules, 2001/2002 and Central Excise Rules, 1944 required duty payment at the time of removal of credit-availed inputs. The manufacturer admitted the clearances without payment of duty and paid a specified amount towards duty liability.

2. The manufacturer had cleared MODVAT credit-availed inputs to sister units and civil works without payment of duty. The Commissioner of Central Excise imposed penalties and interest for these clearances, leading to an appeal against the adjudication.

3. A show-cause notice was issued regarding exemption eligibility under Notification No. 10/2007-C.E., and duty payment obligations were highlighted. The demand for payment and recovery of amounts collected from customers were key issues addressed during the adjudication process.

4. The Tribunal found that the provisions of Section 11AC were not attracted against the manufacturer, setting aside the penalty amount equal to duty. However, a penalty of Rs. 10,000 was upheld for non-submission of relevant details in the monthly return.

5. The demand for a specific amount was deemed unsustainable based on a decision by the Larger Bench of the Tribunal, which clarified the applicability of Section 11D for excess duty collection. The Tribunal set aside this demand accordingly.

6. The impugned order was upheld concerning the confirmation of duty and interest for a specific period. The penalty under Section 11AC was set aside, except for a penalty of Rs. 10,000 under Rule 173Q of the Central Excise Rules, 1944. The demand related to excess duty collection was also set aside with consequential relief.

7. The appeal was partly allowed based on the Tribunal's findings and decisions regarding duty liability, penalties, interest, and the applicability of Section 11D for excess duty collection.