2018 (3) TMI 245 - AT - Central Excise

Tribunal affirms denial of duty credits in freight & insurance, Revenue's appeal dismissed

The Tribunal upheld the decision to deny the appellant's suo motu credits for duty involved in freight and insurance, citing the BDH Industries Ltd. case. ... CENVAT credit - Department has sought to disallow the credit of the duty involved in freight and insurance which the appellant has taken suo motu credit - Held that: - appellant is not entitle to take suo motu credit as per the Larger Bench decision of the Tribunal in the case of BDH Industries Ltd. v. Commissioner of Central Excise [2008 (7) TMI 78 - CESTAT MUMBAI] - decided against appellant. Scope of SCN - Revenue is in appeal on the ground that the adjudicating authority has not confined himself within the limits of the show-cause notice which is for recovery of amount of credit availed suo motu by the assessee - Held that: - The ground on which the Revenue has sought recovery of cash does not have any basis in law - the challenge to imposition of penalty on the ground of being less than the amount of credit that has been availed suo motu is questionable as the show-cause notice has not invoked the provision of Section 11A of the Customs Act, 1962 for imposition of penalty. Appeal dismissed - decided against Revenue. Issues:1. Disallowance of credit of duty involved in freight and insurance taken suo motu by the appellant.2. Jurisdictional High Court's decision on the matter pertaining to FOB value of the product and insurance.3. Appeal by the Revenue regarding recovery of cash and imposition of penalty.Analysis:Issue 1: Disallowance of credit of duty involved in freight and insurance taken suo motu by the appellantThe appellant, engaged in manufacturing medicines for export, invoiced goods at CIF value but the department allowed duty rebate based on FOB value only. The appellant took suo motu credit for the differential amount, which the department sought to disallow. The Tribunal found that the appellant was not entitled to take such credit as per the Larger Bench decision in the case of BDH Industries Ltd. v. Commissioner of Central Excise. The jurisdictional High Court had addressed the issue regarding FOB value and insurance, but the specific aspect of suo motu credit remained unanswered. No alternative case law was presented during the proceedings. Consequently, the Tribunal upheld the decision to deny the suo motu credits, leading to the dismissal of the appeals filed by the appellants.Issue 2: Jurisdictional High Court's decision on the matter pertaining to FOB value of the product and insuranceThe Tribunal noted that the Hon'ble Bombay High Court had approved the Larger Bench decision in the BDH Industries Ltd. case, which addressed the FOB value of the product and insurance. However, the specific aspect related to suo motu credit remained unresolved. Despite no new case law being introduced during the arguments, the Tribunal found no grounds to overturn the order denying the suo motu credits, as the issue remained unanswered to date.Issue 3: Appeal by the Revenue regarding recovery of cash and imposition of penaltyThe Revenue appealed on the grounds that the adjudicating authority exceeded the show-cause notice's limits by making cash recovery contingent on the availability of sufficient credit. The Revenue's claim for cash recovery lacked legal basis, as the credit in question had been utilized and recredited suo motu. Additionally, the challenge to the penalty imposition was questioned, as the show-cause notice did not invoke the relevant provision for penalty imposition. Consequently, the Tribunal dismissed the Revenue's claims for modification of the adjudication order, leading to the disposal of all appeals filed by both the department and the appellant assessee, including the cross objection.This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal, the legal reasoning behind the decisions, and the outcomes of the appeals and cross objection.