2024 (8) TMI 780 - AT - Central Excise

Glass and marble classification dispute: duty demand and penalties set aside after voluntary payment and proper CENVAT credit documentation

Elegant Sales Corporation, Dilip Ganguly, Maganlal Chowdhary, Pijush Raha Versus Commissioner of Central Excise & ST, Vapi

Elegant Sales Corporation, Dilip Ganguly, Maganlal Chowdhary, Pijush Raha Versus Commissioner of Central Excise & ST, Vapi - TMI Issues:Classification of marble tiles, Time limitation for show cause notice, Cenvat credit availment, Penalties under Rule 26 of Central Excise RulesClassification of Marble Tiles:The main issue in this case revolved around the correct classification of marble tiles manufactured by the appellant. The appellant initially classified the marble tiles under a specific category and paid duty accordingly. However, upon inspection by Revenue department officers, it was pointed out that the classification was incorrect, leading to the demand for a differential duty amount. The appellant rectified the classification and paid the differential duty, which was duly declared in their ER-1 return. The Tribunal found that the department was fully aware of the correction made by the appellant, and there was no basis for invoking the extended time proviso under Section 11A of the Central Excise Act, 1944. Consequently, the demand for Central Excise duty was deemed barred by the period of limitation.Time Limitation for Show Cause Notice:The appellant argued that the show cause notice issued by the department was beyond the period of limitation as they had voluntarily paid the differential duty and declared it in their ER-1 return. The appellant contended that the normal period of demand under Section 11A of the Central Excise Act, 1944 is one year, and since the department was aware of the correction made by the appellant, the extended time proviso should not have been invoked. The Tribunal agreed with the appellant, ruling that the demand for Central Excise duty was indeed barred by the period of limitation.Cenvat Credit Availment:Another issue raised in the case was the availment of Cenvat credit by the appellant on imported raw materials used in manufacturing the finished products. The appellant had availed Cenvat credit on the basis of valid duty paying documents, with a portion of the credit taken immediately upon receipt of the raw materials and the balance availed at a later date. The Tribunal held that there was no time limit prescribed under Rule 4 of the Cenvat Credit Rules, 2004, barring the appellant from availing the credit at a later stage. Citing relevant case law and CBEC Circular, the Tribunal upheld the appellant's right to avail Cenvat credit even after a certain period.Penalties under Rule 26 of Central Excise Rules:The department had imposed penalties on the partners and employees of the appellant under Rule 26 of the Central Excise Rules, 2002. The Tribunal found that since the goods manufactured and cleared by the appellant were duty paid, albeit under a wrong classification initially, and the mistake was rectified by paying the differential duty, invoking penal provisions under Rule 26 was not justified. Therefore, the Tribunal set aside the penalties imposed on the partners and employees of the appellant.In conclusion, the Tribunal held that the impugned order-in-original was legally unsustainable, and the appeals filed by the appellant and co-appellants were allowed.