2025 (6) TMI 760 - AT - Central Excise

Recovery of Education Cess and the SHE Cess - overlapping demands - applicability of doctrine of double jeopardy - HELD THAT - The Appellant has rightly claimed that there has been an over-lapping of demand since Show Cause Notices have been issued pertaining to the same period. It is found that out of the confirmed demand in the present proceedings Rs.29, 33, 057/- in respect of demand of Education Cess and SHE Cess and Rs.29, 33, 057/- in respect of disallowance of Cenvat Credit towards payment of Education Cess and SHE Cess the period involved is covered by the earlier Show Cause Notice - demand set asode. Amount utilized by the Appellant in October 2013 towards reversal in terms of Rule 6(3) of Cenvat Credit Rules 2004 and payment of duty of Rs.24, 273/- in terms of Rule 16 of Central Excise Rules 2002 - HELD THAT - The Appellant claims that they have submitted enough documentary evidence which has not been considered by the Adjudicating authority. The appellant is required to be given one more opportunity to produce these documents before the Adjudicating authority who will get these facts verified and take a considered decision. Error in quantification of the demand to the extent of about Rs.1.00 Lakh - HELD THAT - The matter remanded to the Adjudicating authority. The Appellant is directed to submit all the documentary evidence towards their dispute about the quantification before the Adjudicating authority. Rejection of the amount taken as re-credit by the Appellant - HELD THAT - It is submitted that once a proper reconciliation is done towards these amounts it will get clarified that Appellant has not taken any excess re-credit as is being held in the impugned Order-in-Original. Since these details have to be checked and verified properly to come to a proper conclusion it is found that even this matter is required to be looked into by the Adjudicating Authority. Accordingly we are remanding this matter to him. Penalty - Appellants have also pleaded that since the issue was that of interpretation the penalty imposed on them should be set aside - HELD THAT - It is found that this is a reasonable request from their side. The issue as to whether the Basic Excise Duty can be utilized for payment of Education Cess and SHE was under litigation and was ultimately held in favour of the assessee. Considering the same the penalty of Rs.6, 13, 158/- imposed on the Appellant set aside. Conclusion - The demands relating to Education Cess and SHE Cess and the related disallowance of Cenvat Credit set aside on the ground of overlapping demands barred by double jeopardy and res judicata. Appeal disposed off.

Summary

The core legal questions considered in this judgment include:

1. Whether the appellants were entitled to utilize Cenvat Credit under the heading of Basic Excise Duty (BED) for payment of Education Cess (EC) and Secondary and Higher Education Cess (SHE Cess).

2. Whether the demand raised for recovery of EC and SHE Cess and disallowance of Cenvat Credit utilized for payment of these cesses was barred by the doctrines of double jeopardy and res judicata due to overlapping Show Cause Notices for the same period.

3. Whether the adjudicating authority erred in rejecting documentary evidence submitted by the appellants to substantiate utilization of Cenvat Credit towards reversal of Input Tax Credit and clearance of finished goods.

4. Whether there were quantification errors in the demand raised by the revenue.

5. Whether the penalty imposed on the appellants was justified given the nature of the dispute as one of interpretation.

Issue-wise Detailed Analysis:

1. Utilization of Cenvat Credit of Basic Excise Duty for Payment of Education Cess and SHE Cess

The relevant legal framework comprises the Cenvat Credit Rules, 2004, which govern the utilization of Cenvat Credit, and the statutory provisions relating to Education Cess and SHE Cess. The appellants had utilized Cenvat Credit available on Basic Excise Duty for payment of these cesses. A Show Cause Notice was issued alleging that such utilization was not permissible, and consequently, demands were raised for recovery of the cesses along with disallowance of the credit utilized.

The appellants contended that such utilization was admissible under the Cenvat Credit Rules, 2004. This issue had already been the subject matter of earlier proceedings, including an appeal before the Tribunal, which ultimately decided in favour of the appellants, allowing the utilization of BED credit for payment of EC and SHE Cess.

The adjudicating authority, however, distinguished the present demand on the ground that the earlier proceedings had not attained finality at the time of the impugned order and that the present demand was based on a separate ground - contravention of the mandatory condition of an area-based exemption notification due to non-exhaustion of correct Cenvat Credit availability on BED. The authority held that this separate ground justified confirming the demand and that it was not barred by the doctrines of double jeopardy or res judicata.

The Tribunal, upon review, found that the demands were overlapping and related to the same period. It noted that the earlier proceedings had reached finality with the Tribunal allowing the appellants' appeal. Therefore, the Tribunal set aside the demand relating to EC and SHE Cess and the disallowance of Cenvat Credit utilized for payment of these cesses on merits, holding that the doctrine of double jeopardy and res judicata applied to bar the repeated demand.

2. Overlapping Demands and Application of Double Jeopardy and Res Judicata

The appellants argued that the Show Cause Notices issued for the same period created overlapping demands, which should not be sustained simultaneously. The adjudicating authority initially acknowledged that the demand was hit by double jeopardy and res judicata but proceeded to confirm the demand on a separate ground, as noted above.

The Tribunal analyzed this position and held that since the earlier demand had been adjudicated and the appeal allowed, the subsequent demand covering the same amount and period was barred. It emphasized that the two demands were mutually exclusive and could not be pursued concurrently. This reasoning preserved the principles of finality and protection against multiple punishments for the same cause.

3. Rejection of Documentary Evidence Regarding Utilization of Credit for Reversal and Finished Goods Clearance

The appellants submitted documentary evidence to prove that amounts of Rs.58,733/- and Rs.24,273/- were legitimately utilized towards reversal of Input Tax Credit under Rule 6(3) of the Cenvat Credit Rules, 2004, and payment of duty under Rule 16 of the Central Excise Rules, 2002, respectively. The adjudicating authority rejected these submissions on the ground that no documentary evidence was produced.

The Tribunal found that the appellants had indeed submitted relevant documents, which were not considered. It directed that the appellants be granted another opportunity to produce these documents before the adjudicating authority, who was to verify the facts and pass a reasoned order. This approach ensured adherence to principles of natural justice and fair adjudication.

4. Quantification Errors in Demand

The appellants contended that the Show Cause Notice contained quantification errors amounting to approximately Rs.1,00,000. The Tribunal remanded this issue to the adjudicating authority, directing the appellants to submit documentary evidence supporting their claim. The authority was tasked with verifying and rectifying any errors in quantification, ensuring accuracy in demand assessment.

5. Re-credit and Excess Credit Claims

The appellants disputed the rejection of amounts taken as re-credit, asserting that no excess credit was taken. They submitted detailed reconciliations and tables in support of their claim. The Tribunal observed that these details required careful verification and directed the adjudicating authority to examine the matter thoroughly before concluding.

6. Penalty Imposed on the Appellants

The appellants requested that the penalty imposed be set aside, arguing that the issue was one of interpretation and had been litigated extensively. The Tribunal accepted this submission, noting that the question of whether BED credit could be utilized for payment of EC and SHE Cess was under dispute and ultimately decided in favour of the appellants. Consequently, the penalty of Rs.6,13,158/- was set aside as a reasonable relief.

Significant Holdings:

"We find that the Appellant has rightly claimed that there has been an over-lapping of demand since Show Cause Notices have been issued pertaining to the same period... That Show Cause Notice proceedings in the due course had reached the Tribunal and this Tribunal... has allowed the Appellant's Appeal. Therefore, we set aside the demand to this extent on merits."

This establishes the principle that overlapping demands for the same period and amount, which have been adjudicated and allowed on appeal, cannot be pursued again, affirming the application of double jeopardy and res judicata in excise matters.

"The appellant is required to be given one more opportunity to produce these documents before the Adjudicating authority, who will get these facts verified and take a considered decision."

This underscores the necessity of fair procedure and the right of the appellant to present evidence fully before adverse findings are made.

"Considering the same, we set aside the penalty of Rs.6,13,158/- imposed on the Appellant."

This highlights the Court's approach to penalties in cases involving genuine disputes of law and interpretation, emphasizing that penalties should not be imposed where the issue is contentious and ultimately decided in favour of the assessee.

In conclusion, the Tribunal set aside the demands relating to Education Cess and SHE Cess and the related disallowance of Cenvat Credit on the ground of overlapping demands barred by double jeopardy and res judicata. It remanded other disputed issues relating to documentary evidence, quantification errors, and re-credit claims to the adjudicating authority for fresh consideration. The penalty imposed was quashed considering the nature of the dispute. The appeal was disposed of accordingly, and the cross-objection filed by the revenue was also disposed.