Section 11D Recovery Limits Stock Transfers Do Not Trigger Excise Demand When Amount Already Reaches Government

Section 11D(2) of the Central Excise Act did not apply where inputs were cleared as such on stock transfer to sister concerns, because the provision operates only when an assessee collects duty-like amounts from a buyer and fails to remit them to the Government. The Tribunal noted that Rule 3(5) of the Cenvat Credit Rules required payment equal to the credit availed on removal of inputs as such, and that the amount in question had already been credited to the Government through the Cenvat credit account. As the clearances were not sales to buyers and no unpaid collection remained, the recovery demand was unsustainable and was set aside.

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Issues: Whether the excess amount paid on inputs cleared as such on stock transfer to sister concerns, after valuation on CAS-4 basis, was recoverable under Section 11D(2) of the Central Excise Act, 1944.

Analysis: Rule 3(5) of the Cenvat Credit Rules, 2004 required payment equal to the credit availed when inputs were removed as such. Section 11D of the Central Excise Act, 1944 applies only where an assessee collects an amount in excess of the duty assessed or determined from the buyer of such goods as representing duty of excise and fails to pay it to the Government. The Tribunal held that the present clearances were stock transfers to sister concerns and not sales to buyers. It further held that the amount collected through the transaction value adopted by the appellant had already been credited to the Government, even though paid through the Cenvat credit account.

Conclusion: Section 11D(2) was held inapplicable, and the demand could not be sustained. The orders confirming recovery were set aside and the appeals were allowed.

Ratio Decidendi: Section 11D can be invoked only where duty-like amounts are collected from a buyer and remain unpaid to the Government; where the transaction is a stock transfer and the amount has already reached the Government, no recovery under Section 11D lies.

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