2017 (6) TMI 965 - AT - Central Excise

Validity of SCN in terms of Section 11A(1)(b) - duty alongwith interest was paid before issuance of SCN - wrong availment of CENVAT credit - Held that - in reply to the SCN, the appellant filed a detailed reply clearly stating that the appellants are entitled to CENVAT credit on plastic crates and they are also entitled to credit on Security Services as well as Contract Labour Services but there is no finding by the original authority as well as by the appellate authority on the claim of the appellant - Both the authorities have not gone into the merits of the claim of the appellant since the appellants have reversed the cenvat credit along with interest before the issue of SCN. Further both the authorities have not considered the amendment in Rule 15(2) which was brought on 27.02.2010 - this case needs to be remanded back to the original authority with a direction to consider the claim of the appellant - appeal allowed by way of remand.

Summary

Issues:
- Appeal against imposition of penalty under Section 11AC of the Central Excise Act 1944.
- Sustainability of impugned order based on statutory provisions and judicial precedents.
- Non-determination of duty liability under Section 11A before imposing penalty.
- Eligibility of input services and cenvat credit availed.
- Applicability of penalty provisions under Rule 15(2) of Cenvat Credit Rules.
- Barred by limitation due to delayed issuance of show-cause notice.
- Need for remand to original authority for proper consideration of appellant's claims and compliance with natural justice principles.

Analysis:
The appeal challenged the imposition of penalty under Section 11AC of the Central Excise Act 1944. The appellant, a manufacturer of PP woven fabric and sacks, faced allegations of irregularities leading to incorrect cenvat credit availed and short payment of duty. The appellant reversed the past credit upon audit discovery but was penalized under Section 11AC for fraud and duty evasion. The appellant contended that the penalty was unjust as duty liability under Section 11A was not determined, and the authorities failed to assess the eligibility of input services and cenvat credit claimed. Additionally, the appellant argued against the imposition of penalty under Rule 15(2) of Cenvat Credit Rules, citing legal inconsistencies predating February 2010 and the inapplicability of penalty provisions during the relevant period.

The sustainability of the impugned order was questioned based on alleged violations of statutory provisions and binding judicial precedents. The appellant argued that the penalty was imposed without proper consideration of the appellant's submissions, including claims for cenvat credit on plastic crates and various input services. Moreover, the appellant raised concerns regarding the delayed issuance of the show-cause notice, contending that the demand was time-barred due to regular audits and the eligibility of most credits reversed. The need for a remand to the original authority was emphasized to address the unaddressed claims and ensure compliance with natural justice principles.

In the final analysis, the Tribunal set aside the impugned order and remanded the case to the original authority for a fresh decision within three months. The Tribunal highlighted the lack of findings on crucial aspects of the appellant's claims by both the original and appellate authorities, necessitating a thorough review of the appellant's contentions and compliance with procedural and evidentiary requirements. The decision underscored the importance of a comprehensive assessment of the appellant's claims and a reasoned order in line with legal principles and procedural fairness.