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2020 (4) TMI 833

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..... not supported by law. Since the final product is not chargeable to excise duty, cenvat credit cannot be availed on the imported DVDs. However, the appellant has filed the returns which were legally required, with the department. Scrutiny of such returns and calling for any further information would have disclosed this fact that appellant was paying the central excise duty wrongly. The department could have directed them not to pay central excise duty accordingly but the department has not done so. Therefore, the erroneous payment of the appellant made as central excise duty was not detected by the department despite the appellant disclosing in their returns the details which they were mandatorily required to disclose. Under these circumstances, the demand for reversal of CENVAT credit invoking extended period of limitation does not sustain at all - The period in dispute is October 2009 to September 2012 while the SCN was issued well beyond the normal period on 21.02.2015 when this action of the appellant came to light during the audit. It was equally possible for the assessing officers to have scrutinized returns and found that excise duty was being paid wrongly after availing CENV .....

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..... vice agents and is not a manufactured product. Accordingly, show cause notice dt. 18.02.2015 was issued to the appellant proposing to recover the amount of ₹ 27,10,486/- being ineligible cenvat credit taken by them under Rule 14 of CCR 2004 read with the proviso to Section 11A. It was also proposed to demand interest under Rule 14 of CCR read with Section 11AB / Section 11AA of the Central Excise Act, 1944. It was further proposed to impose penalty upon them under Rule 15 (2) of CCR 2004 read with Section 11AC. 5. After following due process, the Additional Commissioner vide OIO dt. 25.02.2016 confirmed the demand and interest and imposed penalties. Aggrieved, the appellant appealed before the first appellate authority which was rejected by the impugned order. Hence this appeal. 6. Ld. Counsel for the appellant would submit, at the outset, that the period of dispute in this case is October 2009 to September 2012. The SCN was issued on 21.02.2015 well beyond the normal period of limitation. It is not in dispute that they had paid central excise duty under Section 4A of the Central Excise Act, 1944. It is also not in dispute that the disputed clearances on payment of duty ha .....

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..... that demand for reversal of cenvat credit availed must fail both on merits and on limitation. Consequently, the demand of interest and imposition of penalty also do not survive. He prayed that the impugned order may be set aside and the appeal may be allowed. 8. Per contra, Ld. D.R supports the findings of the lower authorities. He would urge that cenvat credit is available only if the goods are used for manufacture of the final product and such final products are chargeable to excise duty. Where the final products are exempt, the input credit cannot be taken. In this case, the appellant has not undertaken any manufacturing activity and has only labelled DVDs which have been imported, misclassified them under a different heading and sold them to the dealers. This activity cannot be termed as manufacture in the absence of any specific legal provision to the effect. Therefore, they are not entitled to take cenvat credit wrongly availed by the appellant is liable to be recovered. The impugned order has correctly upheld such recovery along with interest and imposition of penalties. On the question of limitation, Ld. D.R would argue that assessee has only filed returns giving aggr .....

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..... uch goods which are listed in the third schedule and not to others. The DVDs which they have imported were classified under 85234080. We find that this tariff heading is not included in the third schedule. Evidently labelling or relabelling these DVDs will not make them classifiable under a different heading (8708) as has been done by the appellant. Further, we find even the chapter heading 8708 is also not covered under the Third Schedule. Therefore, by no stretch of imagination can the activity of the appellant be called the manufacture . Therefore, the excise duty paid by the appellant treating this activity as manufactured is clearly not supported by law. Since the final product is not chargeable to excise duty, cenvat credit cannot be availed on the imported DVDs. However, we find that the appellant has filed the returns which were legally required, with the department. Scrutiny of such returns and calling for any further information would have disclosed this fact that appellant was paying the central excise duty wrongly. The department could have directed them not to pay central excise duty accordingly but the department has not done so. Therefore, we find that the erroneous .....

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