2014 (6) TMI 792 - AT - Central Excise

Duty demand - Demand of differential duty - Reclassification of goods - Suppression of facts - Mis declaration of goods - Penalty - Availment of MODVAT Credit - Whether IOCL was eligible to pass on credit as per the provisions of Rule 57E of the Central Excise Rules, 1944 - Held that - A perusal of the Tribunal s Order does not suggest that the issue of passing of credit as per the provisions of Rule 57E, though raised by the appellant, was adjudicated by the Tribunal and have thus attained finality. This para only conveys Tribunal s observation that the issue could not be taken up by the Tribunal in view of limited scope of appeal filed by the appellant on the issue of imposition of penalty. Therefore, we agree with the Ld. Advocate of the appellant that this issue was not adjudicated by the Tribunal and thus the question of attaining its finality does not arise. It has thus to be held that impugned credit was admissible to IPCL. On the date of payment of differential duty on 09.02.2000, and also during the period of demand, erstwhile Central Excise Rules, 1944 were in force. The differential duty liability was cast on IOCL vide Order dated 25.08.1999 along with interest under Section 11AB and penalty under Section 11AC. Therefore, on receipt of the said order-in original dated 25.08.1999, also IOCL could not issue certificate in terms of Rule 57E of the Central Excise Rules, 1944 in force during material time on account of exception clause contained in the prevailing Rule 57E(3) of the Central Excise Rules, 1944 because penalty on account of suppression etc. under Section 11AC was imposed on IOCL by the adjudicating authority. IOCL paid differential duty of Rs.14,36,74,091/- on 09.02.2000 against OIO dated 25.08.1999 but filed an appeal with the CEGAT against imposition of interest and penalty. Certificate was issued by IOCL on 18.09.2006, and MODVAT Credit was taken by IPCL in November, 2006 as a result of prolonged litigation which ended only on 17.05.2005 as per the final order passed by CESTAT in the case of the appellant IOCL. In view of the above observations and the case law of CCE Vs. Oil & Natural Gas Limited (2012 (11) TMI 864 - CESTAT, MUMBAI) we hold in the peculiar facts and circumstances of these appeals that IOCL has correctly issued certificate dt. 18.09.2006 and IPCL has correctly taken credit. So far as imposition of penalties upon the appellants are concerned it is held that once on merit credit has been held to be admissible there is no point of imposition of penalties upon the appellants - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility of IOCL to pass on credit as per Rule 57E of the Central Excise Rules, 1944.
2. Validity of IOCL issuing supplementary invoices or certificates for differential duty paid to enable IPCL to take credit.

Detailed Analysis:

1. Eligibility of IOCL to Pass on Credit:

The Tribunal examined whether IOCL was eligible to pass on credit under Rule 57E of the Central Excise Rules, 1944. The Tribunal's Order dated 23.03.2001 did not adjudicate the issue of passing credit as per Rule 57E, thus it did not attain finality. The Tribunal concluded that the impugned credit was admissible to IPCL, indicating that IOCL was eligible to pass on the credit.

2. Validity of Supplementary Invoices or Certificates for Differential Duty:

The Tribunal referred to the case of Commissioner of Central Excise, Raigad Vs. ONGC Ltd. [2012 (282) ELT 513 (Tri. Mumbai)], which dealt with a similar issue. The Tribunal held that procedural changes in the MODVAT/CENVAT rules should not defeat the substantive right to claim credit. The Tribunal noted that on the date of payment of differential duty (09.02.2000) and during the period of demand, the Central Excise Rules, 1944, were in force. The differential duty liability was confirmed by an order dated 25.08.1999, which also imposed interest and penalty under Section 11AC due to suppression of facts.

However, after prolonged litigation, the CESTAT on 17.05.2005 absolved IOCL of the charge of suppression of facts, thereby allowing IOCL to issue certificates under Rule 57E. The Tribunal found that the certificate dated 18.09.2006 issued by IOCL and verified by the jurisdictional Superintendent of Central Excise was valid. The MODVAT rules did not specify a time limit for issuing such certificates, and the CENVAT Credit Rules did not restrict the time for taking credit. Consequently, the Tribunal held that IOCL correctly issued the certificate and IPCL correctly took the credit.

Penalties:

Given that the credit was held to be admissible on merit, the Tribunal found no justification for imposing penalties on the appellants. Thus, the appeals filed by the appellants were allowed.

Conclusion:

The Tribunal concluded that IOCL was eligible to pass on the credit as per Rule 57E and that the supplementary invoices and certificates issued by IOCL were valid for enabling IPCL to take credit. The appeals were allowed, and the penalties imposed on the appellants were set aside.