2016 (11) TMI 683 - AT - Central Excise

Whether an amount of duty partly paid through PLA on the molasses which are consumed captively for manufacture of ethyl alcohol (denatured or potable) under exemption in terms of Notification No. 67/95-CE is correct and whether duty paid only after detection of duty evasion will be admissible as cenvat credit or otherwise? - Held that - the appellant is not seriously contesting that part as to duty liability has been discharged after being detected by the officers and a show cause notice has been issued for invoking the extended period. If that be so, availment of cenvat credit by the appellant is incorrect as the provisions of Cenvat Credit Rules, 2002 do not permit the availment of cenvat credit wherein duty has been paid on being found that duty was evaded by suppression, fraud, collusion or misstatement. To that extent, we hold that the impugned order is correct and legal. Since we are upholding the cenvat credit ineligible, we also hold that the adjudicating authority was correct in confirming the demands with interest and also imposing equivalent amount of penalty. The main appellant s appeal on this is rejected. Imposition of personal penalty on distillery in-charge - Rule 13(1) of the Cenvat Credit Rules, 2002 - Held that - no specific role has been attributed to him except by a bland statement that he being in-charge of the distillery unit, was aware that credit was availed of an amount which was inadmissible. We do not find any reason to uphold such imposition of penalty. Accordingly, the penalty imposed on the individual is set aside. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Duty payment on molasses consumed captively for manufacturing ethyl alcohol under exemption.
2. Admissibility of cenvat credit on duty paid after detection of duty evasion.
3. Imposition of penalty on the main appellant.
4. Imposition of personal penalty on the distillery in-charge under Cenvat Credit Rules, 2002.

Issue 1:
The main issue in the case is whether the duty payment on molasses consumed captively for manufacturing ethyl alcohol under exemption was correct. The appellant had not paid duty on molasses cleared for captive consumption but availed cenvat credit on duty paid molasses for manufacturing denatured alcohol. The appellant accepted the duty liability for molasses consumed captively but still availed cenvat credit. The Tribunal held that the appellant cannot avail cenvat credit if duty was paid after detection of evasion, as per Cenvat Credit Rules, 2002. The impugned order confirming demands with interest and imposing a penalty on the main appellant was upheld.

Issue 2:
The second issue was the admissibility of cenvat credit on duty paid after detection of duty evasion. The Tribunal found that the appellant had paid duty on molasses after detection of evasion, and the extended period was invoked. The appellant's contention that duty liability was discharged after detection and a show cause notice was issued for the extended period was not seriously contested. The Tribunal held that under the Cenvat Credit Rules, 2002, cenvat credit cannot be availed if duty was paid due to evasion. Consequently, the Tribunal rejected the main appellant's appeal on this issue.

Issue 3:
Regarding the penalty imposed on the main appellant, the Tribunal confirmed the demands, interest, and an equivalent penalty. The adjudicating authority's decision to confirm the demands and impose a penalty was deemed correct since the cenvat credit was held ineligible due to duty payment after detection of evasion. Therefore, the main appellant's appeal against the penalty was rejected.

Issue 4:
The final issue concerned the personal penalty imposed on the distillery in-charge under the Cenvat Credit Rules, 2002. The Tribunal found that no specific role attributing to the distillery in-charge was mentioned, except a general statement about being aware of inadmissible credit availed. Consequently, the Tribunal set aside the penalty imposed on the individual, as there was no sufficient reason to uphold the penalty.

In conclusion, the Tribunal upheld the decision on duty payment, ineligibility of cenvat credit on duty paid after evasion detection, and the penalty imposed on the main appellant. However, the personal penalty on the distillery in-charge was set aside due to the lack of specific attribution of a role.