Issuance Of 2 SCN Demanding Short Paid Duty, Denying Cenvat Credit For Same Period Doesn't Amounts To 2 Assessments: CESTAT

The two-member bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) did not find any illegality in Revenue issuing two show cause notices; one for recovery of irregularly availed Cenvat credit and another show cause notice for recovery of duty short paid. It does not amount to two assessments for the same period in this case.

The appellant/assessee is a manufacturer of soft drinks, mineral water and fruit juices and holds Central Excise registration. During the audit of the appellant for the period April 2012 to March 2015, it was observed by the Auditors that the appellant had taken Cenvat credit on the basis of improper challans issued by its head office which is registered as 'Input Service Distributor' as the challans did not contain the addresses of the persons providing the input services.

It was found that the credit was distributed by the head office of the appellant entirely to the appellant and it was not distributed from various manufacturing units as required under sub-rules (i) and (iv) of Rule 2 and Rule 4 of Cenvat Credit Rules ,2004 (CCR, 2004) .

It was observed that the head office of the appellant was distributing input service credit on monthly basis while the pro rata turnover of the previous year of the appellant and of all the units were reckoned for distribution of credit in contravention of Rule 7 of CCR, 2004.

The preliminary objection by the appellant was that a show cause notice dated 10 February 2016 issued by the Department demanding duty short paid by irregularly availing exemption under Notification No. 1/2011-CE along with interest and penalty. The show cause notice dated 18 February 2016 was issued for the same audit period seeking to deny Cenvat credit alleged to have been availed by the appellant. It was argued that two show cause notices cannot be issued by the Department on piecemeal basis for the same period.

The assessee relied on the decision of Calcutta High Court in the case of Simplex Infrastructures Ltd, in which it was held, "there cannot be a double assessment for the period 10 September 2004 to 31 September 2005 as the Department has sought to do. The periods pertaining to which the show cause notice dated 21 April 2006 and the show cause notice dated 7 September 2009 were issued overlap to an appreciable extent". It was submitted that double assessment is not permissible in law as held by the Calcutta High Court in Avery India Ltd. Vs. Union of India. Counsel for the assessee also relied on Duncans Industries Ltd. Vs. Commissioner of Central Excise, New Delhi, Paro Food Products and Shreeji Colourchem Industries.

The Tribunal found that all these case laws dealt with cases in which the assessment of duty/service tax was proposed for the same period and differential duty/service tax was demanded on different grounds in different show cause notices.

However, the CESTAT noted that consequent upon the audit report, a show cause notice was issued demanding duty which is not the subject matter of the dispute. Demand of duty is a matter of assessment. If duty is short paid it can be recovered under Section 11A of the Central Excise Act ,1944 after issuing a notice. The show cause notice which culminated in having nothing to do with duty. It deals with a different issue of Cenvat credit.

"Irregularly availed Cenvat credit is recoverable under Rule 14 of CCR, 2004. There is no detailed mechanism laid down for recovery under Rule 14 of CCR, 2004 and for this purpose the provisions of Section 11A have been made applicable mutatis mutandis for Rule 14 also. Nevertheless, any recovery of irregularly availed Cenvat credit under Rule 14 is not a demand of duty at all," the Tribunal added.

The CESTAT while upholding the 2 show cause notices, held that section 11A deals with the duty which the assessee must pay on final products. Rule 14 deals with the credit of duty on inputs which someone else had paid which the assessee has taken credit of. Any denial of Cenvat taken will not affect the duty liability. Similarly, any demand of duty will not affect the Cenvat credit. If Cenvat credit is wrongly availed, a penalty can be imposed under Rule 15 of CCR, 2004. If duty is short paid, a penalty can be imposed under Section 11AC.

Case Title: M/s Varun Beverages Limited Versus Commissioner of Central Excise & Service Tax, Alwar

Citation: Excise Appeal No. 50702 Of 2017

Counsel For Appellant: Advocate Bimal Jain

Counsel For Respondent: Authorised Representative O.P. Bisht

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