2015 (2) TMI 559 - AT - Central Excise

Denial of deemed credit - clearance of processed fabrics for home consumption during the period from August, 2001 to March, 2004 under the provisions of para 6 of Notification No. 6/2002-CE (NT) dated 01.03.2002 - Held that - Mainly for the reasons that after the processing is over the fabrics were inspected by the customers, certain aspects were noticed and in order to rectify the defects, they undertook additional processing such as rotary, peaching or zero zero etc. and job charges for these processing carried out and went unnoticed by the dealing clerk. Which mean that the job charges were not included in the assessable value due to mistake and there was no intention to suppress the facts or intention to evade payment of duty. Therefore it cannot be said that in the facts and circumstances of the case that the appellants were having any intention of fraud, wilfull mis-statement or suppression of facts and have intention to evade payment of duty in contravention to the provisions of the Central Excise Act/Rules. Moreover as already ordered by Tribunal, excess payments on account of loading by 15% were to be adjusted against short payments. Therefore, we hold that in this case the extended period is also not invokable. In this case, we find that for the period 15.8.2001 to 31.3.2003, show cause notice has been issued by invoking extended period of limitation on 23.8.2006, as we hold that the extended period of limitation is not invokable. Therefore, we hold that all the demands in this case are barred by limitation. Appellants are paying duty on job charges plus 15% towards notional profit as per the Trade Notice No. 20/2001 dated 24/03/2001 which was not required to be paid. If the 15% notional profit is excluded then the appellant have paid excess duty which is required to be adjusted against the charges of additional processing such as rotary peaching or zero zero etc.. Then the duty demand would not be there; accordingly the appellant would be entitled to take deemed credit as per notification No. 6/2002 CE(NT) dated 1/3/2002. In these terms when there is no demand of duty against the appellant they are entitle for availing deemed credit as per notification no. 6/2002. In the case of goods cleared for home consumption deemed credit cannot be denied on inputs when duty is paid on final products and provisions of para 6 of notification No. 6/2002 do not get attracted. More so when the excess payment of duty on manufactured products on account of 15% notional credit has not been adjusted. The adjustment has also not been done in case of exports and it cannot be held that export consignments were over-valued. In these circumstances, as extended period of limitation is not invokable consequently demand of duty is not sustainable. Therefore, the appellant has availed deemed credit correctly. - Impugned order is set aside - Decided in favour of assessee.

Issues:
1. Confirmation of duty demand against the appellant.
2. Denial of deemed credit.
3. Imposition of interest and penalties on the appellant and co-appellants.
4. Validity of excess charges not included in assessable value.
5. Application of extended period of limitation.
6. Adjustment of excess payments against short payments.
7. Entitlement to deemed credit under notification No. 6/2002.

Analysis:
1. The judgment addresses the confirmation of duty demand against the appellant, M/s. Angadpal Industries Pvt. Ltd. The department alleged short payment of Central Excise duty amounting to Rs. 7,85,423/- for processed fabrics cleared from August 2001 to March 2004. Additionally, deemed CENVAT credit amounting to Rs. 90,89,899/- was disallowed. The Tribunal remanded the matter back to the adjudicating authority due to discrepancies in valuation methodology.

2. The denial of deemed credit under Section 11A(1) read with Rule 12 of the CENVAT Credit Rules, 2002 was a crucial issue. The appellant argued that excess duty payments made due to loading job charges by 15% should be adjusted against short payments. The Tribunal agreed that excess payments should be adjusted, and if the 15% notional profit is excluded, the duty demand would not stand. Consequently, the appellant was entitled to avail deemed credit correctly under notification No. 6/2002.

3. Interest and penalties were imposed on the appellant and co-appellants, including directors and managers. The Tribunal found no intention of fraud or evasion of duty. It held that there was no suppression of facts and that excess payments should be adjusted against short payments. As a result, the extended period of limitation was deemed inapplicable, and all demands were barred by limitation.

4. The judgment also discussed the validity of excess charges not included in the assessable value of processed fabrics. The appellant's argument that excess payments due to loading job charges by 15% should be adjusted against short payments was upheld. The Tribunal emphasized that there was no intention to evade duty and that adjustments should be made accordingly.

5. The application of the extended period of limitation was a significant aspect of the case. The Tribunal held that the demands for the period 15.8.2001 to 31.3.2003 were barred by limitation as the extended period was not invokable. Consequently, all demands during this period were deemed unsustainable.

6. The issue of adjustment of excess payments against short payments was crucial in determining the correct duty liability. The Tribunal emphasized that excess payments made by the appellant should be adjusted against short payments alleged by the department. This adjustment was necessary to ensure the correct computation of duty liability.

7. Lastly, the entitlement to deemed credit under notification No. 6/2002 was a key point of contention. The Tribunal ruled in favor of the appellant, stating that when there is no demand of duty, the appellant is entitled to avail deemed credit correctly. The adjustment of excess payments against additional processing charges was crucial in determining the correctness of deemed credit availed by the appellant.

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