2016 (11) TMI 1335 - AT - Central Excise

Demand u/r 25 of the Central Excise Rules, 2002 - challenge to benefit of Notification No. 56/2002-CE dated 14.11.2002. The said notification was amended in the year 2008 wherein the cash refund was restricted for 34% of the value addition - Held that - I have gone through the show cause notice and the impugned order. In the show cause notice no mala-fide has been alleged against the appellant, therefore, no penalty can be imposed under Rule 25 of the Central Excise Rules, 2002. Admittedly, the provisions of section 11AC of the Act are missing, therefore, no penalty is imposable on them. I find that during the intervening period, the appellant was having sufficient balance in their cenvat credit account/PLA, therefore, they are not liable to pay interest during the intervening period in the light of the decision of Hon ble High Court of Karnataka in the case of Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT . Further, I find that the appellants have filed their regular ER-1 returns on 08.02.2013 showing details of availment refund of duty paid through PLA in the intervening period. In that circumstance, a show cause notice was issued to the appellant on 26.02.2014 is time bared in the light of the above discussion. Therefore, I do not find any merit in the impugned order, the same is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against order demanding interest and imposing penalty under Rule 25 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Challenge to Notification and Refund Availment:
The appellant, located in Jammu & Kashmir, availed benefit under Notification No. 56/2002-CE. The notification was amended in 2008, limiting cash refund to 34% of value addition. The High Court set aside the notification, allowing refund up to 50%. The appellant availed 100% refund in December 2012 and filed ER-1 returns. Subsequently, a show cause notice demanded interest and imposed a penalty under Rule 25 of the Central Excise Rules, 2002.

2. Arguments and Submissions:
The appellant's counsel argued that the department was aware of the refund in March 2013 through ER-1 returns, making the notice time-barred. They contended that due to sufficient balance in cenvat credit account, no interest was payable, citing a Karnataka High Court case. The Revenue supported the impugned order, stating the reversal was done in March 2013, justifying the timely notice issuance.

3. Judicial Analysis and Decision:
The Tribunal noted the absence of mala-fide in the show cause notice, precluding penalty under Rule 25. As Section 11AC provisions were absent, no penalty could be imposed. Considering the appellant's balance in cenvat credit account, they were not liable for interest during the period, aligning with the Karnataka High Court precedent. The appellant's filing of ER-1 returns in February 2013, reflecting the refund, further supported the argument that the notice issued in February 2014 was time-barred. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal's judgment favored the appellant, emphasizing the lack of mala-fide in the notice, absence of penalty provisions, and the appellant's compliance with filing returns and maintaining sufficient balances, leading to the dismissal of the demand for interest and penalty under Rule 25 of the Central Excise Rules, 2002.