2007 (11) TMI 46 - AT - Central Excise

Appellant's Procedural Lapses Not Evasion: Tribunal Rules in Favor

The Tribunal found that the appellant's procedural lapses did not result in revenue loss or an intent to evade duty payment. The Commissioner's demand for ... Arrangement of supply of inputs to job worker without taking permission from Dept. – Such procedural lapse did not involve any loss of Revenue to Govt. – Moreover Dept. already known to such irregularities – Larger period not invokable in SCN to raise demand Issues:- Applicability of job work scheme- Failure to follow prescribed procedure- Demand of duty, interest, and penalty- Invocation of larger period- Intent to evade payment of dutyApplicability of job work scheme:The appellant, a manufacturer of 'provitamin capsules,' availed duty credit on various inputs without obtaining permission to operate under the job work scheme. The appellant cleared finished goods from the premises of the job worker without following the prescribed procedure. The Commissioner demanded the wrong credit taken, interest, and penalty under Rule 15 of the CENVAT Credit Rules. The appellant argued that they did not evade duty and had not failed to discharge appropriate duty on the finished goods cleared.Failure to follow prescribed procedure:The appellant's counsel contended that the appellant did not fail to discharge appropriate duty on cleared goods or misuse MODVAT credit. The appellant admitted to not strictly following the procedure prescribed under Notification No.214/86-CE dated 25.3.1986. The jurisdictional Assistant Commissioner had previously penalized the appellant for availing CENVAT Credit without obtaining required permission.Demand of duty, interest, and penalty:The impugned order demanded Rs.1,04,03,546/-, interest, and an equal penalty amount under Rule 15 of the CENVAT Credit Rules. The demand was based on the appellant's alleged avoidance of following the job work procedure to evade duty payment. The Commissioner invoked the proviso to Section 11A of the Central Excise Act to demand the wrong credit taken and interest.Invocation of larger period:The department had noticed irregularities in the appellant's actions as early as January 2006. The appellant argued that the larger period could not be invoked as a Show Cause Notice had already been issued and adjudicated by the Assistant Commissioner in December 2006. The Tribunal found that the procedural lapses did not result in any loss of revenue to the government, and the facts did not support the Commissioner's finding of an intent to evade duty payment.Intent to evade payment of duty:The Tribunal concluded that the appellant's procedural lapses did not involve revenue loss to the government. The Tribunal did not find any substance in the Commissioner's finding that the appellant had failed to follow the procedure with an intent to evade duty payment. Therefore, the Tribunal set aside the impugned order and allowed the appeal.