2010 (3) TMI 536 - AT - Central Excise

Demand - Limitation - The assessee was using a software for computation of duty liability to be discharged at the time of removal of components for making PCBs and that this software had been programmed when the components in question did not attract SAD. The authorities had tentatively concluded that the assessee had knowingly short paid such SAD on components. Thus demand interest and penalty confirmed. Held that - The appellants submitted that the credit of SAD relatable to electronic components removed during the material period was never utilized and they always had credit in excess of Rs. 2.12 crores in their CENVAT account during the material period. This showed that the appellants did not have the intention to avail CENVAT credit wrongly. Therefore, the demand of interest and imposition of penalty were not justified. Demand is barred by limitation and extended period not invokable.

Summary

Issues:
1. Short reversal of Special Additional Duty (SAD) on imported inputs for manufacturing PCBs.
2. Demand of duty, interest, and penalty under CENVAT rules.
3. Applicability of case laws and legal provisions in determining liability.

Issue 1: Short reversal of SAD on imported inputs for manufacturing PCBs
The appellants, engaged in manufacturing CTVs, imported electronic components and paid duties, including CVD and SAD. During March to September 2006, they short reversed SAD on clearances of imported inputs for PCB manufacturing. The authorities alleged deliberate short payment, leading to a demand of Rs. 2,12,40,288/-, interest, and penalty under CENVAT rules.

Issue 2: Demand of duty, interest, and penalty under CENVAT rules
The appellants argued that the short payment was inadvertent due to software error, rectified upon discovery. They maintained excess credit in their CENVAT account, indicating no intention to misuse CENVAT credit. Citing legal precedents, they contended against the demand of interest and penalty, emphasizing inadvertence and lack of deliberate defiance.

Issue 3: Applicability of case laws and legal provisions in determining liability
The Tribunal analyzed the case records and submissions, finding that the appellants had not evaded duty intentionally. The demand of duty invoking a larger period was deemed time-barred, rendering the interest and penalty unsustainable. The Tribunal noted that the demand of credit and penalty imposed were based on incorrect provisions, vacating the demand and penalty. The provisions invoked for imposing penalty were deemed inapplicable, leading to the allowance of the appeal filed by the appellants.

This judgment delves into the intricacies of duty payment, inadvertent errors, and legal interpretations regarding CENVAT rules. It highlights the importance of intentionality in determining liability and the necessity of correctly applying legal provisions in tax matters. The Tribunal's detailed analysis and reliance on legal precedents ensure a fair and just decision in this case.