Tribunal upholds decision on excise duty demand, cites system error in returns

The Tribunal partly allowed the Revenue's appeal and disposed of the assessee's Cross Objection, upholding the Ld. Commissioner's decision to set aside the central excise duty demand. The Tribunal emphasized the system error in the ER-4 return and accepted the CENVAT Credit Register corresponding to the ER-1 return. It found no need to remand the matter due to limitations and lack of suppression, ruling in favor of the assessee.

---

---

Issues:
Appeal against Order-in-Appeal setting aside central excise duty demand due to denial of CENVAT Credit.
Remand of the matter to original authority for verification purpose.
Cross objection filed by the assessee in the departmental appeal.

Analysis:
The appeal was filed by the Revenue against the Order-in-Appeal dated 23.04.2018, where the demand of central excise duty amounting to Rs. 27,51,403/- was set aside by the Ld. Commissioner, CGST & Central Excise, Kolkata North, due to denial of CENVAT Credit. The Ld. Commissioner remanded the matter to the original authority for verification. The assessee, M/s Tide Water Oil Co. (India) Ltd., filed a cross objection in the departmental appeal. The dispute arose from discrepancies in the CENVAT credit figures in the monthly ER-1 returns and the annual ER-4 return filed by the assessee for the period 2010-11. The Ld. Commissioner observed a system error in the ER-4 return, which had erroneous entries due to which no negative inference could be drawn against the assessee. The Ld. Commissioner accepted the CENVAT Credit Register submitted by the assessee, which corresponded to the ER-1 return, and held the credit figures disclosed in ER-1 as sacrosanct. The Tribunal concurred with the Ld. Commissioner's findings and ruled in favor of the assessee, setting aside the duty demand.

The Revenue contended that the Ld. Commissioner lacked the power under Section 35A of the Central Excise Act to remand the case to the original authority. Additionally, the Revenue argued that no new evidence could be produced by the assessee before the Commissioner in the appeal stage as per Rule 5 of the Central Excise Appeals Rules. However, the Ld. Counsel for the assessee refuted these arguments, stating that the system error in the ER-4 return was evident, and the CENVAT Credit Register and revised ER-4 return were submitted at the adjudication stage. The Ld. Counsel emphasized that the documents were not new evidence and should be considered. The assessee also filed a Cross Objection under Section 35B(4) of the Central Excise Act, disputing the direction for remand by the Ld. Commissioner for comparing CENVAT credit figures in the returns. The Tribunal agreed with the assessee's submissions, highlighting that the demand was barred by limitation, and no suppression was involved since the proceedings were initiated based on statutory returns.

In conclusion, the Tribunal partly allowed the appeal filed by the Revenue and disposed of the Cross Objection filed by the assessee. The Tribunal upheld the Ld. Commissioner's decision to set aside the duty demand, emphasizing the system error in the ER-4 return and the correspondence of CENVAT Credit Register with the ER-1 return. The Tribunal found no reason to remand the matter back to the original authority, considering the limitations and lack of suppression in the case.

---