Bayer Vapi Pvt Ltd. Vs C.C.E. & S.T.-Daman (CESTAT Ahmedabad)
In a remarkable ruling by CESTAT Ahmedabad, Bayer Vapi Pvt Ltd. successfully appealed against the imposition of redundant excise duty demands and penalties by C.C.E. & S.T.-Daman. The core issue in this case was the company’s right to claim Cenvat re-credit after a suo moto reversal, especially when no discrepancies were found in the audit. This article dissects the intricacies of the judgment, offering insights into the regulations surrounding Cenvat re-credit, suo moto reversal, and the legal ramifications of the case.
The Background
Bayer Vapi had paid the export duty twice: first at the time of the clearance of goods and then inadvertently with their monthly dues. An audit objection arose, stating that Bayer Vapi should have applied for a refund rather than taking a suo moto re-credit.
The Show Cause Notice
A show cause notice was issued, demanding the re-credit amount, along with interest and penalties. This demand was upheld by the Learned Commissioner Central Excise, Customs & Service Tax Daman, prompting Bayer Vapi to file the present appeal.
Legal Points Raised
Bayer Vapi’s counsel argued that since the company had already reversed the credit on the auditor’s direction, the case should have been closed. Furthermore, they cited various past judgments to reinforce that suo moto re-credit was not illegal under such circumstances.
CESTAT’s Ruling
CESTAT observed that Bayer Vapi was a law-abiding entity that reversed the credit when asked. The court ruled that the show cause notice was ab initio void and illegal. Given that there were no discrepancies found, the court asserted that Bayer Vapi has a legal right to re-credit the amount of Rs. 1 crore in their Cenvat account.
Conclusion
The CESTAT Ahmedabad ruling is pivotal for its clear stance on Cenvat re-credit and suo moto reversal. This case serves as a crucial precedent for businesses in similar circumstances, highlighting the importance of following the correct legal channels even when confronted with administrative issues. Ultimately, the ruling confirms the legal right to re-credit after suo moto reversal, particularly when there is a lack of discrepancy in the company’s financial statements.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are the appellant have paid duty on export of all the goods at the time of clearance. Subsequently, while making the monthly payment of duty inadvertently they also included the duty paid on export in their monthly dues of the duty and same was paid. Thus, they have paid the same duty twice. When it was detected the appellant have taken the suo-moto credit in their Cenvat account. During the audit it was objected that the appellant should not have taken the suo-moto re-credit, whereas they should have applied for refund, on this the appellant reversed the re-credit. However, the show cause notice dated 11-11-2011 was issued whereby, it was proposed to demand the amount of suo-moto re-credit and also to appropriate the same amount, which was reversed by the appellant on the direction of audit officers. It was also proposed to demand the interest and imposition of penalty. The show cause notice was adjudicated by the Learned Commissioner Central Excise, Customs & Service Tax Daman, whereby, the demand of Central Excise Duty equivalent the Cenvat Credit availed suo-moto amounting to Rs. 1 crore was confirmed and the same was appropriated demand of interest and imposition of equal amount of penalty was also confirmed. Therefore, the present appeal filed by the appellant.
2. Shri S. Suriyanarayanan, Learned Counsel, appearing on behalf of the appellant submits that once the appellant had reversed the credit of duty, which was paid second time no show cause notice should have been issued and case could have been closed after reversal on the direction of the audit. He submits that by adjudicating the show cause notice and Adjudicating Authority has confirmed the duty paid twice, which is absolutely incorrect the illegal. Under any circumstances on the clearance of goods duty cannot be demanded twice.
2.1 He submits that after reversal of the credit even on issue a show cause notice the appellant have made their submission before the Adjudicating Authority. Therefore, the Adjudicating Authority should have allowed the re-credit. He further submits that even the suo-moto re-credit was not illegal once the duty was paid twice the second payment should have been restored to the appellant. In support he placed reliance on the following judgments:
