Compounded Levy Scheme - discharge of duty liability from Credit earned legitimately

PJ/Case laws/2012-13/1065

Case: Commissioner of C. Ex., Jallandhar V/s Punjab Castings (P) Ltd.

Citation: 2011 (274) E. L. T. 554 (Tri. – Del.)

Issue:- Compounded Levy Scheme – duty liability can be discharged by utilising cenvat credit earned legitimately before opting for compounded levy.

Brief Facts: - Respondent-assessee were functioning under Compounded levy scheme. They debited the amount of duty payable during the period from Cenvat account.

Show cause notice was issued and demand was confirmed asking respondent to pay duty through PLA.

In appeal, the Commissioner (Appeals) set aside the demand of duty to be paid through PLA and set aside of penalty and interest.

Revenue is aggrieved by the said order-in-appeal has filed appeal before the Tribunal.

Appellant’s Contention: - Revenue submitted that the respondents had debited the amount of duty payable during the period wherein compounded levy scheme was applicable to their products and it should be paid through PLA by them not through Cenvat Credit Account. That the provisions of compounded levy scheme do not allow the assessee to debit the amount through Cenvat account and amounts needs to be paid only through PLA.

It is submitted that the Commissioner (Appeals) has erred in setting aside the demands confirmed by the Adjudicating Authority and also that the penalty and interest needs to be charged from the assessee. That the assessee had failed to discharge the monthly duty liability as fixed by the Commissioner, in time, and consequently have failed to pay duty in the manner prescribed under the law.

Respondent’s Contention: - Respondents draws attention of the Bench to the fact that issue involved in these cases are discharge of duty liability on the arrears to be paid by them under compounded levy scheme through Cenvat account. It is his submission that there is no dispute that the appellants had debited the Cenvat account for the arrears on their final products but that they were eligible to avail such Cenvat credit and utilise the same.

Reasoning of Judgement: - The Tribunal found that the case put up against the assessee in the show cause notice clearly indicates that the demand, penalty and interest on the demand is only on the ground of discharge of duty liability on the final products covered under compounded levy scheme after 1-4-2000 through Cenvat Credit Account. It is seen that the Commissioner (Appeals) has come to conclusion that such amounts which were due from the appellants could be discharged through debit in Cenvat credit and were accordingly debited by them on their own. Such a debit through Cenvat Credit Account cannot be faulted with and there is no need for imposition of penalty and interest as Cenvat Credit Rules specifically indicate utilisation of legit credit availed for discharge of duty liability. There is no dispute that the credit availed was eligible credit.

The Tribunal also found that the show cause notice issued to the respondent in this case, clearly indicates that various show cause notices are issued to them, demanding the outstanding duty along with interest and also proposition of imposition of penalty as per the provisions of compounded levy scheme under Section 3A of the Central Excise Act and the same are pending adjudication. The Tribunal were of the considered view that Revenue is at liberty to adjudicate such show cause notices which are issued for the demand of duty on the goods during the period when the goods were covered under the compounded levy scheme and duty liability there under was not discharged by the respondent assessee.

Decision: - Appeals dismissed.

Comment:- There are number of issues when an assessee opts for compounded levy scheme from normal cenvat scheme. First was that manufacturer has to reverse the credit on inputs lying in stock as the assessee cannot use cenvated inputs in compounded levy. This was decided in favour assessee. Second, the cenvat credit lying on date of shifting to compounded levy will lapse but the tribunal courts decided that the credit already earned cannot lapsed. Now, in the same line, this decision clearly says that the cenvat credit already earned can be used for payment of compounded duty also. So, all the decisions are against the revenue.

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PJ/Case laws/2012-13/1065

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