2013 (6) TMI 145 - HC - Central Excise

Collection of reversal of cenvat credit from Customers - Collection of amount in the guise of Central Excise duty - Section 11D of the Central Excise Act 1944. - held that - There is no dispute in the present case between the parties that amount in question has already been deposited with the Department. The objection of department is based on Section 11D of the Act. The said provision has been considered in detail by the larger Bench of the Tribunal in Unison Metals Ltd. vs. Commissioner of Central Excise, Ahmedabad-I (2006 (10) TMI 171 - CESTAT, NEW DELHI). Recovery order issued by the Department on the basis of Section 11D of the Act was absolutely illegal and is liable to be quashed, the same has rightly been quashed by the learned Tribunal. - Decided against revenue.

Summary

Issues:
Recovery of Central Excise duty deposited through CENVAT credit account, applicability of Section 11D of the Central Excise Act, 1944, legality of deposit mode, interpretation of Circular dated 7th August, 2002.

Analysis:
The case involved a show cause notice issued to the respondent by the Assessing Officer regarding the recovery of an amount under the Central Excise Act, 1944. The Assessing Officer ordered the recovery of the amount collected from customers as Central Excise duty and imposed a penalty. The respondent appealed the order, leading to a series of appeals and ultimately reaching the High Court.

The substantial question of law framed by the High Court was whether Section 11-D of the Central Excise Act, 1944 applied to cases where the assessee cleared goods using CENVAT credit for items chargeable at NIL rate of duty. The appellant argued that the deposit mode was incorrect as the amount collected should have been deposited in cash, not through the CENVAT credit account. The respondent contended that the amount collected had been deposited, and the mode of deposit was legal and justified.

The High Court examined the impugned orders and the provisions of Section 11D of the Act. It considered a Circular dated 7th August, 2002, which clarified that Section 11D did not apply where duty collected had been deposited with the government, even if done through the CENVAT credit account. The Court noted that the recovery order based on Section 11D was illegal and rightly quashed by the Tribunal.

Ultimately, the High Court found no merit in the appeal and ruled in favor of the assessee, directing each party to bear its own costs. The judgment emphasized the legality of the deposit mode and the applicability of the Circular in exempting the assessee from Section 11D requirements.