2011 (3) TMI 1090 - AT - Central Excise

Appellant's valuation error absolved, penalties overturned, cenvat credit denial and duty demand annulled

The Tribunal found the appellant's bonafide error in valuation, leading to excess payment and no intent to evade duty. Thus, penalties under Section 11AC ... Demand of differential duty of central excise during the period from 17.04.02 to 05.05.04 - Held that:- The very fact that there was an excess payment during the period of one year and the payment of duty as soon as the same was pointed out by the department by the appellant in our opinion established their bonafide without any doubt. Further the very fact that the appellant had made excess payment would show that they were fully aware of Revenue-neutrality and therefore had no intention to evade duty. In view of the above, thus imposition of penalty under Section 11AC by invoking extended period is not warranted in this case. Since duty and interest has been paid and the learned advocate fairly submitted that they are not challenging this and they would not be claiming refund of the same, the duty demand and interest are confirmed as not challenged. Learned Commissioner has imposed penalty equal to this amount under Section 11AC and in view of the observations above, the penalty is set aside. Cenvat credit taken on LDPE bags and furnace oil used in the manufacture of zinc dust manufactured on job work basis - Held that:- When there is no allegation in the show cause notice that goods were not manufactured on job work basis or the principal manufacturer had not paid duty, the need for producing any evidence does not arise. In this view of the matter denial of the cenvat credit cannot be sustained and has to be set aside. Further, the penalty equal to this amount imposed by the learned Commissioner is also required to be set aside. The learned advocate did not press the arguments as regards demand of duty for Rs.3,241/- even though in the memorandum of this appeal was also contested. Accordingly the demand for Rs.3,241/- has to be sustained as not contested. Since the appellant has already paid more than Rs.2 lakhs during the investigation itself, this amount has to be deducted from the amount already paid. Further the appellant is also entitled to reduction of 75% of the penalty or Rs.3,241/- from penalty since the amount has been paid before issue of the adjudication order. Issues:1. Valuation of goods manufactured and cleared to another unit.2. Denial of cenvat credit on inputs used in manufacturing.3. Duty demand for cleared empty drums without payment.4. Imposition of penalties.Issue 1: The appellant was engaged in production and clearance of zinc dust, including job work for another unit. Revenue alleged improper valuation method, resulting in a short levy of Rs.52,37,663. The appellant also availed cenvat credit on inputs for duty-exempt goods. Duty demand, interest, and penalties were imposed. The Tribunal found the appellant's bonafide error in valuation, leading to excess payment and no intent to evade duty. Thus, penalties under Section 11AC were set aside.Issue 2: The demand for cenvat credit of Rs.10,94,558 on inputs used in manufacturing was contested. The Tribunal referred to a previous decision, holding that such credit is permissible when goods are cleared on payment of duty by the principal manufacturer. The Commissioner's rejection of the claim due to lack of evidence was deemed unjustified as the show cause notice itself indicated job work manufacturing for the principal manufacturer. The denial of cenvat credit and associated penalties were set aside.Issue 3: A demand of Rs.3,241 for cleared empty drums without payment of duty was contested. The Tribunal upheld this demand due to non-payment of duty and procedural irregularities. The penalty was reduced considering the amount already paid and the appellant's proactive payment before the adjudication order.Issue 4: The penalty on the Executive (Excise) was set aside due to the minimal confirmed demand. The Tribunal took a lenient view, considering the individual's position as an employee and the reduced demand amount. The appeals were disposed of accordingly.