Appellant wins appeal as Section 11D demand set aside after SAD credit reversal under Rule 3(5)

CESTAT Ahmedabad allowed the appeal against demand under Section 11D of Central Excise Act. The appellant had reversed SAD credit under Rule 3(5) of Cenvat Credit Rules, 2004 when clearing inputs as such, and showed corresponding amount in invoice. CESTAT held that Section 11D applies only when excess duty is collected but not paid to government. Since appellant had already paid the amount by reversing credit in Cenvat account, Section 11D was inapplicable. Following precedent in Unison Metals Ltd case, CESTAT ruled that once duty amount is paid to government and charged in invoice, Section 11D provisions do not apply. The demand was set aside.

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Issues Involved:
1. Whether the reversal of SAD credit under Rule 3(5) of the Cenvat Credit Rules, 2004, and its mention in the invoice as "AED 100%" constitutes a procedural lapse.
2. Whether the demand under Section 11D of the Central Excise Act, 1944, is applicable when the SAD credit has been reversed but shown in the invoice.

Issue-wise Detailed Analysis:

1. Procedural Lapse in Mentioning SAD Credit Reversal:
The appellant, M/s Grauer & Weil (India) Ltd., reversed the SAD credit under Rule 3(5) of the Cenvat Credit Rules, 2004, and mentioned it in the invoice as "AED 100%". The show cause notice argued that the reversal of credit should not be passed on the invoice and that SAD is not an excise duty. The appellant contended that although the invoice did not specifically mention "SAD credit reversed," the fact of reversal was undisputed. The procedural lapse of not mentioning "SAD credit reversed" should not sustain the demand.

2. Applicability of Section 11D of the Central Excise Act, 1944:
The show cause notice demanded recovery of the SAD portion under Section 11D, arguing that the amount shown in the invoice as "AED 100%" was excess duty recovered from the buyer. The appellant argued that Section 11D is not applicable as the SAD credit was reversed, and the amount was shown in the invoice. They further argued that if SAD is considered a customs duty, the demand under Section 11D would not sustain, as Section 28B would be applicable.

The tribunal noted that the appellant had taken credit of CVD and SAD upon receipt of inputs and reversed the same when the inputs were cleared. The tribunal referred to Section 11D, which mandates depositing any excess amount collected as excise duty with the Central Government. However, since the amount was reversed under Rule 3(5) and shown in the invoice, Section 11D was not applicable.

Relevant Judgments:
- Unison Metals Ltd. (2006): The tribunal held that Section 11D does not apply if the amount collected as duty is already paid to the revenue. Double taxation is not contemplated.
- Kesoram Spun Pipes and Foundries Ltd. (2020): The Calcutta High Court held that if the manufacturer debits the CENVAT credit by the equivalent amount collected as duty, Section 11D is not applicable.

Conclusion:
The tribunal concluded that since the appellant had reversed the credit and shown the amount in the invoice, Section 11D was not applicable. The demand under Section 11D was set aside, and the appeal was allowed with consequential relief.

Order:
The impugned order was set aside, and the appeal was allowed with consequential relief. The judgment was pronounced in the open court on 29.08.2024.

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