The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has upheld the issuance of two show cause notices demanding the duty, which was short paid, and denying Cenvat credit respectively for the same period.
The appellant, M/s Varun Beverages Limited 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 Cenvatcredit 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.
The appellant,contended 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.
CESTAT President Justice Dilip Gupta and Technical MemberP.V. Subba Rao found that “Consequent upon the audit report, a show cause notice was issued demanding duty which is not the subject matter of the present dispute. Demand of duty is a matter of assessment. If duty is short paid it can be recovered under Section 11A after issuing a notice. The show cause notice which culminated in the present appeal has 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 demand of duty at all.”
“Section 11A deals with the duty which the assessee has to 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, penalty can be imposed under Section 11AC. Therefore, we do not find any illegality in the Revenue issuing two show cause notices; one for recovery of irregular availed Cenvat credit (which is subject matter of the present appeal) 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 bench said.
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