2024 (12) TMI 150 - AT - Central Excise

Appellant granted partial relief on duty liability for returned goods but remains liable for stock shortage under Rule 16(2)

M/s. Makesworth Industries Ltd. Versus Commissioner, CGST & CX, Kolkata-South

CESTAT Kolkata ruled on duty payment liability for returned goods and stock shortages. The appellant properly reversed Cenvat credit during initial ... Liability for duty payment on returned goods and subsequent re-manufacturing - suppression and mis-declaration of goods - recovery of entire amount of credit availed on the inputs - shortage of goods - HELD THAT:- It is noticed that the appellant at the time of first clearance of the impugned goods duly reversed the Cenvat credit that was availed by them and had issued proper tax invoices after debiting the duty on the said products. However, for whatever reasons when the goods were returned it is noticed that the appellant did inform the department in writing and subsequently has entered the said goods in their RG-23A Part-I and availed the credit in RG-23A Part-II register. These factual inputs are also part of the excise returns for the relevant periods and have been reflected in the monthly ER-1 Returns. There is not a penny of merit in the department’s case on this pretext. Prima facie this is a case of frivolous litigation initiated at the behest of the department, which, ought to have been strictly eschewed in the first place as no case is apparently made out against the appellant having rendered the requisite information in ER-1 returns. So far as the shortage of stock of LDPE re-processed granules (3,000 kgs.) and calcium carbonate (7,950 kgs.) is concerned, the appellant in defence have submitted that the duty thereon for an amount of Rs.37,343/- has already been paid by them and they undertake to pay interest thereon. Pursuant to the return of the goods the appellants successfully negotiated new customers for supplying the said material on which credit was availed is borne out from records. This aspect is provided in law in terms of Rule 16(2) of the Central Excise Rules and therefore cannot be faulted upon. The department having chosen to remain silent when the intimation dated 30.06.2008 upon return of the impugned goods was conveyed, it is not open for them to rake up the matter after almost 16-17 months - the said amount of Rs.11,24,760/- paid by the appellant on a charge of clandestine clearance made by the department is bereft of any valid reason thereto and cannot be sustained. Thus, no case of imposition of penalty equal to the said amount under section 11AC of the Central Excise Act, 1944 is also made, in respect of the said amount. Shortage of certain goods - HELD THAT:- In so far as shortage of certain goods noticed by the department during their visit on 11.06.2011 involving a duty amount of Rs.37,343/- is rightly payable by the assessee and has been reportedly paid. Nonetheless the appellant is also required to pay interest thereon and equivalent amount of penalty under section 11AC on the said amount of Rs.37,343/- - The appellant is directed to make good the amount of penalty and the amount of interest on the amount so upheld, within one month from the date of receipt of this order. Appeal disposed off. Issues:1. Whether the appellant is liable for duty payment on returned goods and subsequent re-manufacturing.2. Whether the department's charge of suppression and mis-declaration against the appellant is valid.3. Whether the appellant is liable for penalty and interest on certain goods with a shortage noticed by the department.Analysis:Issue 1:The appellant, a manufacturer of Cable Filling Compound, cleared goods to customers but the products were returned due to non-matching specifications. The appellant re-manufactured the goods with additional materials and sold them to other customers, paying duty. The department alleged suppression and mis-declaration, seeking to recover the credit availed on the returned goods. The appellant argued that they informed the department about the return, incorporated details in returns, and provided evidence of re-processing. The tribunal found no suppression and ruled in favor of the appellant, quashing the duty demand.Issue 2:The department charged the appellant with suppression and mis-declaration for re-processing returned goods without proper duty payment. The tribunal noted that the appellant had informed the department, reversed the credit, and provided evidence of re-processing. The tribunal held that the department's case lacked merit and was frivolous, as the appellant had complied with reporting requirements. The tribunal ruled that the appellant's duty payment was valid, rejecting the department's charge of suppression.Issue 3:The department noticed a shortage of certain goods during a visit, and the appellant admitted to the shortfall, paying the deficient duty. The tribunal upheld the duty payment but required the appellant to pay interest and penalty. The appellant was directed to settle the penalty and interest within a specified period. The tribunal disposed of the appeal, providing consequential benefit to the appellant.Overall, the tribunal found in favor of the appellant regarding duty payment on returned goods and rejected the department's charges of suppression. However, the appellant was directed to pay interest and penalty on the shortage of certain goods as noticed by the department.