2011 (7) TMI 611 - AT - Central Excise

Tribunal upholds Commissioner's decision on duty demand, penalty, and interest, allowing Cenvat credit use. Revenue appeals dismissed.

The Tribunal upheld the Commissioner's decision to set aside the demand of duty to be paid through PLA and the setting aside of penalty and interest, ... Compounded levy scheme - Section 3A of the Central Excise Act - Commissioner (Appeals) set aside the demand of duty to be paid through PLA, penalty and interest - demand is only on the ground of discharge of duty liability on the final products covered under compounded levy scheme after 01.04.2000 through Cenvat credit account - Held that:- Commissioner (Appeals) was correct in setting aside the order in original on ground that such amounts which were due from the appellants could be discharged through debit in Cenvat credit and were accordingly debited by them on their own. Such a debit through Cenvat credit account cannot be faulted with and there is no need for imposition of penalty and interest as Cenvat Credit Rules specifically indicate utilisation of legit credit availed for discharge of duty liability. There is no dispute that the credit availed was eligible credit - Decided against the Revenue Issues:1. Discharge of duty liability under compounded levy scheme through Cenvat account.2. Setting aside of demand of duty, penalty, and interest.3. Interpretation of Cenvat Credit Rules regarding utilization of credit for duty liability.Analysis:1. The appeals were filed by Revenue against an order-in-appeal where the Commissioner had set aside the demand of duty to be paid through PLA and the setting aside of penalty and interest. The Revenue argued that duty payable during the period of the compounded levy scheme should be paid through PLA and not through Cenvat Credit account. The Commissioner had erred in setting aside the demands confirmed by the adjudicating authority and in not charging penalty and interest from the assessee for failing to pay duty in the prescribed manner.2. The respondents contended that they were eligible to avail Cenvat credit and utilize it for the arrears on their final products under the compounded levy scheme. The Tribunal found that the case against the assessee was based on the discharge of duty liability through Cenvat credit account. The Commissioner had correctly concluded that the amounts due could be discharged through debit in the Cenvat credit account, which was permissible under the Cenvat Credit Rules. The Tribunal held that there was no need for penalty and interest as the credit availed was legitimate.3. The show cause notice issued to the respondent demanded outstanding duty, interest, and proposed penalty under the compounded levy scheme. The Tribunal held that Revenue was within its rights to adjudicate such notices for duty demand on goods covered under the compounded levy scheme if the duty liability was not discharged by the assessee. In conclusion, the Tribunal upheld the Commissioner's decision to set aside the original order, finding no merit in the appeal filed by Revenue. The appeals were dismissed.