2017 (8) TMI 1000 - AT - Central Excise

Scope of SCN - CENVAT credit - job-work - goods sent to job-worker not received back after the expiry of the statutory period of 180 days - penalty - Held that - The SCN does not anywhere propose the imposition of penalty in relation to non-receipt of goods from job worker within 180 days. Ld. AR was specifically asked to show the same but could not do so. It is evident that invocation of penal provisions in concluding Para 18 of show cause notice is based on the justification in Para 10-17, which are entirely based on the question of wrongful availment of Cenvat Credit of ₹ 38,23,069/-, which has been dropped by the adjudicating authority. Hence the belaboured effort of Ld. Commissioner (Appeals) in para 8 and 9 to arrive at a finding that the penalty was proposed on the appellants in relation to non-receipt of goods within 180 days as well is clearly not supported by the facts enumerated in the SCN. Considering the conduct of the appellants who reversed the Cenvat Credit on the spot on 23.06.2004 and paid the interest long before the issue of the show cause notice and the absence of any ground in the show cause notice for the penalty on the appellant in relation to non-receipt of goods within 180 days, the order of Ld. Commissioner (Appeals) is clearly unsustainable and is therefore, set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Wrong availment of Cenvat Credit amounting to ?38,23,069.
2. Non-receipt of goods from job workers within 180 days.
3. Imposition of penalties on the appellants.

Detailed Analysis:
Issue 1: The case revolved around the alleged wrongful availment of Cenvat Credit of ?38,23,069 by the appellants for the period from 29.05.2003 to 08.07.2004. The Central Excise Officers found discrepancies during a visit to the appellants' premises, leading to a show cause notice demanding the said amount under Section 11A of the Central Excise Act. However, the adjudicating authority dropped this main demand, and only a demand of ?2,61,373 was confirmed along with interest. The penalties under Rule 13 were proposed on the appellants, which were contested in the appeal.

Issue 2: Another aspect of the case involved the non-receipt of goods from job workers within 180 days, which led to penalties being imposed on the appellants. The Ld. Advocate argued that Rule 13 applies when Cenvat Credit is wrongly taken, and since the credit on unreturned goods was not taken wrongly, the penalties were unjustified. The show cause notice did not specifically propose penalties regarding this issue, and the penalties were linked to the dropped demand of ?38,23,069, making them unsustainable.

Issue 3: The imposition of penalties on the appellants was a contentious issue throughout the proceedings. The Ld. Commissioner (Appeals) upheld the penalties, but the appellate tribunal found that the penalties were unjustified as they were based on the dropped demand of ?38,23,069, and not on the issue of non-receipt of goods within 180 days. The tribunal concluded that the penalties under Rule 13 did not apply in this case, especially considering the actions taken by the appellants to reverse the Cenvat Credit and pay interest promptly.

In the final judgment, the appellate tribunal set aside the order of the Ld. Commissioner (Appeals) and allowed the appeals filed by the appellants, emphasizing that the penalties imposed were not supported by the facts presented in the show cause notice.