2018 (11) TMI 1366 - AT - Central Excise

CESTAT Chennai remands case for fresh decision, no penalty under Section 11AC, emphasizes fair consideration

The CESTAT Chennai remanded the case back to the adjudicating authority for a fresh decision, emphasizing the need for a thorough review of the ... Clandestine removal - alleged shortage of inputs formed a part of the excess found in the Incoming Warehouse - the allegation of the Revenue was that the inputs were found short on which the CENVAT Credit of ₹ 2,35,943/- which was availed, was liable for recovery and also an amount of ₹ 11,80,169/- being the CENVAT on the alleged shortage with regard to the finished goods. Held that:- The lower authorities have not given any finding on the factual contentions urged as also the pleading of the Ld. Advocate with regard to the difference in SAP value and physical value and nothing else - the lower authorities should consider the above facts and then give a proper finding before arriving at any shortage in terms of either inputs or finished goods, for which reason the matter remanded back to the file of the adjudicating authority for passing a de novo adjudication Order after considering the contentions of the appellant and also the case-law that the assessee/appellant may rely on. Penalty u/s 11AC - Held that:- The appellant had lost the documents due to floods/natural calamity coupled with the fact that no suppression could be attributed to the appellant, no penalty could be levied under Section 11AC of the Act. Appeal allowed in part. Issues:Recovery of wrongly availed CENVAT Credit, duty demand on excisable goods found short, interest, penalty under Section 11AC of the Central Excise Act.Analysis:The case involved the appellants, manufacturers of automobile electrical parts, facing a Show Cause Notice for recovery of wrongly availed CENVAT Credit and duty demand on excisable goods found short. The lower adjudicating authority confirmed the disallowance and duty demand along with interest and penalty. The appellant appealed to the Commissioner, who upheld the lower authority's decision. The appellant then appealed to the CESTAT Chennai.During the hearing, the appellant's advocate argued that the alleged shortage of inputs was part of the excess found in the Incoming Warehouse and that the valuation by the Department lacked factual or legal basis. The advocate also highlighted issues with quality control and incoming rejections affecting physical stock. The appellant's lack of mala fide intention and challenges faced during floods were emphasized to contest the penalty under Section 11AC.The CESTAT Chennai observed that the factual contentions and explanations provided by the appellant were not adequately considered by the lower authorities. The case was remanded back to the adjudicating authority for a fresh decision, instructing a thorough review of the appellant's contentions and relevant case law. The adjudicating authority was directed to provide reasonable opportunities for the appellant and consider the plea of revenue neutrality.Considering the appellant's loss of documents due to natural calamity and the absence of suppression of facts, the CESTAT Chennai ruled that no penalty could be levied under Section 11AC. The appeal was allowed for statistical purposes, with the deletion of the penalty under Section 11AC. The judgment emphasized the importance of fair consideration of appellant's contentions and the need for a detailed adjudication process.This judgment highlights the significance of due process, thorough consideration of factual contentions, and the impact of external factors on compliance issues in excise matters. The decision underscores the principles of natural justice and the requirement for authorities to provide reasonable opportunities for parties to present their case effectively.