2023 (9) TMI 518 - AT - Central Excise

Reversal of cenvat credit wrongly availed - Extended period of limitation - demand with interest and penalty - appellant debited the excess credit availed amounting to Rs.2,20,756/- but did not pay the interest due on the same - whether duty for the second clearance should be made in terms of the first part of Rule 16(2) as demanded by the Revenue or as per the later part of Rule 16(2) as prayed for by the appellant - HELD THAT - It is found from a plain reading of Rule 16(2) that if the first part of Rule 16(2) is applicable the second part will not apply. The phrase in any other case will not cover a case where no process of manufacture has taken place. The facts of clearance involved in the present case is also the same. Goods which were initially cleared for home consumption and later found unfit for use were brought back to the factory and were then cleared as scrap without putting them to any further process amounting to manufacture. As no process was involved the first part of Rule 16(2) would come into play and the goods were to be cleared after paying an amount of duty equal to the CENVAT credit taken. The appellant has stated that the lower authority had failed to see that there was no intention to evade payment of duty and the appellant had cleared the goods as rejected metal containers on payment of duty on the transaction value. Hence section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002 could not have been invoked - the wordings of Rule 16 of Central Excise Rules, 2002 does give room for interpretation and there has been no positive act of suppression that has been brought out on behalf of the appellant - the demand shall be limited to the normal period. The impugned order upheld on merits - no grounds have been made for invocation of extended time limit - the imposition of penalty under sec. 11AC of the Central Excise Act, 1944 and sec. 25 of the Central Excise Rules, 2002 does not arise - appeal disposed off.

Summary

Issues involved:
The issues involved in this case are related to the availing of credit on rejected and returned metal containers, payment of duty equivalent to the CENVAT credit taken, imposition of interest and penalty, interpretation of Rule 16 of the Central Excise Rules, 2002, and the applicability of different parts of Rule 16(2) in the clearance of goods.

Summary of Judgment:

Issue 1: Availing of credit on rejected metal containers:
The appellant, engaged in the manufacture of metal containers, had availed credit on all rejected and returned metal containers received in their factory. The dispute arose as they had not followed the procedure for paying duty equivalent to the CENVAT credit taken at the time of subsequent clearance. The appellant contended that they had not evaded payment of duty as they followed the rules correctly. The Tribunal examined Rule 16 of the Central Excise Rules, 2002, which allows credit on goods brought back to the factory for various reasons. The Tribunal found that the appellant was entitled to take credit as per the rules, but the critical question was whether the goods had been subjected to any process amounting to manufacture before the second clearance.

Issue 2: Interpretation of Rule 16(2) and payment of duty:
The disagreement between the parties centered on whether the duty for the second clearance should be paid as per the first part or the second part of Rule 16(2). The appellant argued that their case fell under the phrase "any other case" in the rule, while the Revenue contended that the duty should be paid based on the first part of Rule 16(2. The Tribunal referred to a similar case and held that since no process of manufacture was involved in clearing the goods as scrap, the duty equal to the CENVAT credit taken was required to be paid. The Tribunal rejected the appellant's reliance on another judgment, stating that the law was correctly interpreted in the present case.

Issue 3: Imposition of penalty and interest:
The appellant argued that there was no intention to evade payment of duty, and hence, penalty under sec. 11AC of the Central Excise Act, 1944, and Rule 25 of Central Excise Rules, 2002 should not have been imposed. The Tribunal found that there was no positive act of suppression by the appellant and limited the demand to the normal period, thereby ruling out the imposition of penalty under the extended time limit.

Conclusion:
The Tribunal upheld the impugned order on merits, requiring the duty to be paid for the normal period with interest if applicable. The penalty under sec. 11AC of the Central Excise Act, 1944, and sec. 25 of the Central Excise Rules, 2002 was not imposed. The appeal was disposed of accordingly.