2010 (3) TMI 537 - AT - Central Excise

Tribunal upholds limitation period, denies penalty, allows credits for excise duty

The Tribunal upheld the demand for the normal limitation period, denied the penalty, and allowed the Appellant to claim credits for Basic Excise Duty and ... Textile and textile article - Exemption - A Show Cause Notice dated 30-5-07 was issued to the Assessee proposing to deny the benefit of the Notification No. 30/04-C.E. in respect of clearance of final products and accordingly, proposing demand of Rs. 5,39,17,583.00 along with interest and proposing penalty under Section 11AC. The Commissioner by the impugned Order confirmed the demand of duty along with the interest and imposed equal penalty. Held that - credit reversed subsequently and plea that assessee be deemed not to have availed credit, rejected considering Tribunal order in case of Hind Lamps Ltd. v. CCE, Kanpur 2010 -TMI - 76306 - CESTAT, NEW DELHI. Condition of Notification violated. Benefit of Notification not available. Issues Involved:1. Interpretation of Notification No. 30/04-C.E.2. Reversal of CENVAT Credit and its implications.3. Limitation period for demand.4. Eligibility for credit of Basic Excise Duty and Additional Excise Duty.Detailed Analysis:1. Interpretation of Notification No. 30/04-C.E.:The core issue revolves around whether the term 'Credit of Duty' in the proviso to Notification No. 30/04-C.E. includes Education Cess. The Appellant argued that 'Credit of Duty' should be limited to Basic Excise Duty and Additional Excise Duty, as these were the duties exempted by the Notification. They relied on various judgments to support this interpretation, suggesting that the distinction between Cess and Duty of Excise should be maintained. Conversely, the Respondent contended that 'Credit of Duty' should be interpreted broadly to include any duty, including Education Cess, as per the natural meaning and the context provided by Section 37(2)(xvia) of the Central Excise Act and Rule 3 of the CENVAT Credit Rules. The Tribunal concluded that since Education Cess is considered a Duty of Excise and was credited under the CENVAT Credit Rules, the Appellant violated the Notification's condition by availing this credit.2. Reversal of CENVAT Credit and its Implications:The Appellant argued that since they reversed the CENVAT Credit of Education Cess along with interest on 26-9-06, it should be treated as if they never availed the credit, thereby fulfilling the Notification's conditions. They cited several precedents to support this view. However, the Tribunal disagreed, referencing the Tribunal's decision in Hind Lamps Ltd., which considered similar issues and concluded that reversal of credit after availing it does not negate the initial contravention of the Notification's conditions.3. Limitation Period for Demand:The Appellant contended that a substantial portion of the demand was time-barred, as the Show Cause Notice was issued on 30-5-07, covering a period starting from October 2004. They argued that the Department was aware of the credit availed through periodical returns, negating any suppression of facts. The Tribunal accepted this argument, stating that the demand for the period prior to 2006 was indeed time-barred. Consequently, the demand and interest should be recalculated for the normal limitation period, and no penalty under Section 11AC was warranted due to the lack of suppression with intent to evade duty.4. Eligibility for Credit of Basic Excise Duty and Additional Excise Duty:The Appellant's alternative plea was that if the demand on the final product was confirmed due to the availed Education Cess credit, they should be allowed to claim credit for Basic Excise Duty and Additional Excise Duty. The Tribunal agreed, allowing the Appellant to rework the duty liability to include credits for these duties in addition to the Education Cess for the inputs used in the final products.Conclusion:The Tribunal upheld the demand for the normal limitation period, denied the penalty, and allowed the Appellant to claim credits for Basic Excise Duty and Additional Excise Duty. The Appellant was instructed to rework the duty liability and submit the calculations to the Jurisdictional Assistant Commissioner/Deputy Commissioner for verification and further action. The appeal was disposed of accordingly.