2015 (9) TMI 1025 - AT - Central Excise

Recovery of suo motu credit - credit of pre-deposit taken after a favorable decision without filing refund claim - demand differential duty - Re-classification of goods - Held that - In the de novo proceedings the adjudicating authority had limited his findings and ordered recovery by saying that appellants failed to produce any proof of filing refund claim as directed by the Commissioner (Appeals). There is a justification in Ld. consultant s submission that Tsunami attacked the East Coast in 2004 and caused calamity of huge loss of lives and damaged of house property. That being a case one cannot brush aside their plea that their office was totally damaged and ravaged by Tsunami and all their records damaged. I find this bonafide reason merits consideration as why they could not produce evidence before the authorities - amount paid is only a deposit during investigation it is to state that once adjudication authority dropped the proceedings in this case the consequential benefit is automatic in so far as the deposits made by the appellant during pendency of adjudication proceedings. Therefore the question of refund claim under Section 11B and time-bar and unjust enrichment does not arise. Both the original authority and LAA conveniently overlooked all the above vital facts and held that what is paid by them is duty not paid under protest and also held as time-barred. Amount paid by the appellant is only a deposit pending proceedings initiated by the department and once the said proceedings are dropped the appellants are entitled for suo motu credit of such deposit. The only lapse of appellants is of not intimating the department of taking such re-credit by writing letter and it is only a procedural lapse and liable to be condoned. The reliance placed by the Revenue in the case of BDH Industries Ltd. (2008 (7) TMI 78 - CESTAT MUMBAI) is not applicable to the present case and clearly distinguishable as the issue referred to Larger Bench was on excise duty paid and taking credit suo motu whereas in the present case as already discussed above the amount paid is only deposit during investigation proceedings. - impugned order upholding the recovery of credit with interest and imposition of penalty is liable to be set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Recovery of suo motu credit taken by the appellant.
2. Classification of goods under the correct Chapter Heading.
3. Validity of re-credit without filing a refund claim under Section 11B.
4. Procedural compliance and the impact of the Tsunami on record-keeping.

Detailed Analysis:

1. Recovery of Suo Motu Credit:
The primary issue in this case was whether the appellant's suo motu credit taken after a favorable order from the Commissioner of Central Excise, without filing a refund claim under Section 11B, was correct. The Department argued that the appellant should have filed a refund claim and not taken the credit on their own. The appellant contended that the amount paid was not excise duty but a lump sum deposit made during the investigation, thus making them eligible for suo motu credit.

2. Classification of Goods:
The appellant, a manufacturer of "Monocrotophos" (Technical Grade), initially classified the goods under Heading 3808.10 and paid the appropriate duty. However, the Department sought to reclassify the goods under Chapter Heading 2942.00, arguing that technical grade pesticides are excluded from Chapter 38 of CETA. The Commissioner of Central Excise dropped the demand for differential duty after the Supreme Court dismissed the Revenue's appeal in a related case.

3. Validity of Re-Credit Without Filing Refund Claim:
The appellant took re-credit of the amount paid during the investigation after the Commissioner dropped the proceedings. The Department's contention for recovery of the credit was based on the appellant not filing a refund claim under Section 11B and not paying duty under protest as per Rule 233B. The adjudicating authority and Commissioner (Appeals) held that the appellant did not produce evidence of filing a refund claim or any intimation to the Department about the suo motu availment of credit.

4. Procedural Compliance and Impact of Tsunami:
The appellant argued that they had filed a refund claim but could not provide evidence as their office and factory premises were damaged by the Tsunami in December 2004, which washed away all their documents and records. The Department could not trace the refund claim either. The appellant's failure to intimate the Department about the re-credit was deemed a procedural lapse, which they argued should be condoned.

Judgement Summary:
The Tribunal considered the submissions from both sides and perused the records. It was found that the amount paid by the appellant during the investigation was not excise duty but a deposit, as the payment was made during the DGCEI's investigation. The Tribunal referred to previous case laws, including the Gujarat Engineering Works case, which held that amounts deposited during investigations are not considered duty and thus not subject to Section 11B provisions.

The Tribunal also noted that the appellant's office was damaged by the Tsunami, which justified their inability to produce the refund claim evidence. The procedural lapse of not intimating the Department about the re-credit was considered minor and condonable.

The Tribunal concluded that the appellant was entitled to suo motu credit of the deposit made during the investigation. The impugned order upholding the recovery of credit with interest and the imposition of a penalty was set aside, and the appeal was allowed with consequential relief.

Conclusion:
The Tribunal's decision emphasized that the amount paid during the investigation was a deposit, not excise duty, and thus the appellant was entitled to suo motu credit. The procedural lapse of not informing the Department was deemed minor and condonable, leading to the setting aside of the impugned order and allowing the appeal with consequential relief.