The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) consisting of Ajay Sharma (Judicial Member) has held that a short payment of excise duty is not sufficient in order to invoke the extended period.
The appellant/assessee is in the business of manufacturing colour TVs, LCDs, LEDs, washing machines, split air conditioners, and their spare parts. The appellant has been availing Cenvat Credit as per Rule 3 of the Cenvat Credit Rules, 2004. The appellant is providing after-sale service to their customers and clearing spares and components for the service. The free services were provided for the in-warranty period. For out-of-warranty periods, the services were provided on a chargeable basis. For both the services, the appellant had outsourced them to M/s. Adonis Electronics Pvt. Ltd., who were providing the services to the appellant's customers.
The appellants were getting the report by the 5th of the next month of raw materials consumed for in-warranty products, and the excess excise duty paid on account of clearance of in-warranty spares in the previous month was adjusted against the duty payments for the next month. Similarly, the excess duty paid in the month of March was adjusted against the duty payments for April.
The appellant was asked by the department to furnish the details of the adjustments of duty payments on the spares and components consumed for providing free warranty services against the duty payments on the spares used for the repairs of their warranty products. The appellant provided the details. A show cause-cum-demand notice was issued demanding Central Excise duty be paid on the clearance of excisable goods along with interest and penalty. The Adjudicating Authority confirmed the demand of Central Excise duty along with interest and equal penalty, and a fine of Rs. 5 lakhs was also imposed in lieu of confiscation. The appeal filed by the appellant before the Commissioner (Appeals) was rejected.
The issue raised was whether the appellant was justified in availing suo moto credit of excess duty paid in the previous month on account of clearance of input effected under Rule 3(5) of the Cenvat Credit Rules, 2004.
The appellant contended that since the entire proceeding is revenue neutral, there is no loss to the revenue and so the demand is not sustainable. According to the Chartered Accountant, the extended period was not invocable as there was no suppression of the facts with the intent to evade duty. The entire proceedings are barred by limitation since the show cause notice was issued after the expiry of more than one year from the relevant date, i.e., the date of filing of excise returns.
The department contended that the appellant had deviated from the laid down provisions and had instead opted to pay duty by suo motu adjusting the payments towards their future liabilities, which was not permissible. There was no provision in the Central Excise Act or Rules to adjust the excise duty debited against the excess duty liability for the subsequent month.
The tribunal held that the excess payment of duty can be adjusted against tax liability. The procedure adopted by the appellant may not be proper, but that itself cannot make it illegal per se.
"I am unable to find the said objection or any finding on unjust enrichment from the orders of the authorities below or from the show cause notice. This was never the case with the department. There is no whisper anywhere that at any point of time the appellant had passed on the burden to the buyer," the CESTAT said.
Case Title: M/s. MIRC Electronics Ltd. Versus Commissioner of GST & Central Excise, Mumbai
Citation: Excise Appeal No. 86105 of 2019
Counsel For Appellant: CA Bibek Halwai
Counsel For Respondent: Authorised Representative Sanjay Hasija