2015 (10) TMI 620 - AT - Central Excise

Area based exemption - Availment of exemption under notification no. 56/02-CE - quantum of exemption to the assessee in terms of refund/self credit in PLA - Held that - As per the scheme of this notification, if during a particular month the assessee pays more duty through cenvat credit to that extent, the duty payment through PLA will get reduced and he will get less refund and if the entire duty in respect of the goods cleared during a particular month is paid through cenvat credit, the quantum of refund available would be nil. - Thus, the availability of more credit does not benefit an assessee in any manner and, on the contrary, reduces the refund available to him in terms of this notification. Appellant availed and utilized higher cenvat credit during December, 2006 and March 2007, they paid lesser duty through PLA and to that extent, they got lesser quantum amount of self credit. - Therefore, once this excess cenvat credit, to which they were not entitled, is denied, their entitlement to pay duty through PLA would increase by the same amount and this is what they have done. Once the duty of ₹ 51,40,745/- is paid through PLA, the assessee would be eligible for its self credit in PLA. In view of this, we hold that there was no justification for confirmation of demand of ₹ 51,07,031/- against the appellant and imposition of penalty of equal amount on them. Moreover, when in this case the Assistant Commissioner by an order passed on 17.02.2009 had denied the self credit of ₹ 51,07,031, there was absolutely no justification for the Commissioner to pass another order confirming the demand for the same account and also imposing penalty. - When neither the duty demand of ₹ 51,07,031/- nor the penalty of equal amount under Section 11AC is sustainable, there is no question of recovery of penalty by adjusting it from refund for subsequent merits - Decided in favour of assessee.

Summary

Issues:
1. Self credit of excess Cenvat credit taken by appellant in December 2006 and March 2007.
2. Denial of self credit by Jurisdictional Assistant Commissioner.
3. Adjustment of penalty from refund for subsequent months.

Analysis:

Issue 1: Self Credit of Excess Cenvat Credit
The appellant mistakenly took excess Cenvat credit in December 2006 and March 2007, resulting in a total excess credit of &8377;51,40,745. This led to the appellant paying lesser duty through PLA and receiving a reduced refund under notification no. 56/02-CE. Upon detection, the appellant reversed the excess credit by debiting the PLA. Subsequently, in October 2007, the appellant took self credit of the same amount. The Department objected, stating that self credit is only permissible for duty paid through PLA on finished goods cleared during a month. However, the Tribunal ruled that once the excess Cenvat credit was reversed, the appellant's entitlement to pay duty through PLA increased by the same amount, justifying the self credit entry. The Tribunal held that the denial of self credit and the penalty imposed were unwarranted, as the appellant's actions were revenue neutral.

Issue 2: Denial of Self Credit by Jurisdictional Assistant Commissioner
The Jurisdictional Assistant Commissioner denied the self credit of &8377;51,07,031 in an order dated 17.02.2009, which was upheld by the Commissioner (Appeals). However, the Tribunal found that the denial was unjustified, as the appellant had correctly debited the excess Cenvat credit in the PLA and subsequently took self credit in accordance with the notification's provisions. The Tribunal held that the denial of self credit was incorrect and, therefore, the penalty imposed by adjusting the refund for subsequent months was unsustainable.

Issue 3: Adjustment of Penalty from Refund for Subsequent Months
The Assistant Commissioner adjusted the penalty amount of &8377;51,07,031 from the refund sanctioned for subsequent months. The Commissioner (Appeals) upheld this adjustment. However, the Tribunal found that since the duty demand and penalty were deemed unsustainable, there was no basis for adjusting the penalty from subsequent refunds. Consequently, the Tribunal set aside the impugned orders passed by the Commissioner and Commissioner (Appeals), allowing the appeals with consequential relief to the appellant.