Section 11D and Cenvat credit: duty collected from buyers on inputs removed as such remained recoverable, with penalty sustained.

Section 11D of the Central Excise Act applies where an assessee collects an amount from purchasers as excise duty on goods removed as such and does not remit it to the Government. The assessee's reliance on discharge through Cenvat credit did not assist, because credit can be used only within the limits authorised by the Rules and cannot justify collecting a higher sum in the guise of duty. The penalty and consequential demand were also sustained, the court finding repeated contraventions and no material to displace recovery.

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Issues: (i) Whether Section 11D of the Central Excise Act, 1944 applied where the assessee collected an amount from purchasers as excise duty on removal of inputs as such and discharged the amount through Cenvat credit. (ii) Whether the penalty and consequential demand confirmed by the Commissioner were sustainable.

Issue (i): Whether Section 11D of the Central Excise Act, 1944 applied where the assessee collected an amount from purchasers as excise duty on removal of inputs as such and discharged the amount through Cenvat credit.

Analysis: The amount collected from purchasers was described as excise duty although no manufacturing activity was undertaken on the goods removed as such. Under the applicable Cenvat Credit Rules, the assessee could reverse credit equal to the credit availed on such inputs, but could not collect a higher amount in the guise of excise duty and adjust it through Cenvat credit. Section 11D operates where a person collects any amount in excess of the duty assessed or determined and paid on excisable goods, or collects an amount as representing duty of excise, and does not pay it to the Central Government. The assessee's reliance on the permissibility of payment through credit did not assist it, because credit can be utilised only for purposes authorised by the Rules.

Conclusion: Section 11D applied and the amount collected as excise duty was recoverable by the Department.

Issue (ii): Whether the penalty and consequential demand confirmed by the Commissioner were sustainable.

Analysis: The Commissioner had found repeated clearances in breach of the Rules over a large number of transactions and imposed penalty within the permissible limits. The contention based on limitation was not pressed before the Court, and no material was shown to displace the recovery. The Court found no reason to interfere with the penalty or the consequential demand.

Conclusion: The penalty and consequential demand were sustained.

Final Conclusion: The appeal succeeded for the Revenue, the Tribunal's order was set aside, and the Commissioner's order was restored; the questions of law were answered against the assessee.

Ratio Decidendi: An amount collected from buyers as excise duty on goods cleared as such cannot be retained or adjusted through Cenvat credit unless the Rules specifically permit such utilisation, and Section 11D fastens liability to pay to the Central Government any amount so collected in the guise of duty.

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