CESTAT Restricts M.M. Printers’ Excise Demands To Normal Period, Grants Cum-Duty Benefit And Sets Aside Penalties

M/s M. M. Printers manufactured printed products, including diaries, letter pads, carry bags, calendars, cards, envelopes and notebooks.

Following an investigation, the Department issued a show-cause notice seeking, among other things, excise duty of ₹41,23,340 on diaries, letter pads and printed carry bags; ₹7,51,579 on other printed goods allegedly cleared at concessional rates while availing CENVAT credit; and ₹88,69,844 under Rule 6(3) of the CENVAT Credit Rules, 2004, for common input services used in manufacturing exempted goods.

Penalties were also proposed against the company and its director, Shri Sanjay Kumar Garg.

In its 2019 order, the Tribunal confined the first demand to the normal limitation period, set aside penalties, and remanded the other demands for verification of proportionate credit reversal, leaving limitation and other issues open.

On de novo adjudication, the Commissioner confirmed ₹6,82,796 of the first demand and re-confirmed the other demands and penalties.

The company and its director appealed.

Rule 6 of the CENVAT Credit Rules, 2004 provides options for addressing credit attributable to exempted goods; proportionate reversal of credit may place the assessee in the position of having not availed the credit.

The Tribunal relied on Chandrapur Magnet Wires (P) Ltd. v. CCE, Bombay Dyeing & Mfg. Co. Ltd., Hello Minerals Water (P) Ltd., Link Well Telesystems Pvt. Ltd. and Tiara Advertising for the treatment of reversed credit as non-availment.

The Tribunal’s earlier remand order required verification of the amount of proportionate credit actually reversed and left limitation and other grounds open for determination.

It also applied the principles that an extended limitation period requires a basis such as suppression or misstatement, and that penalties are not justified absent mala fides.

The Tribunal found that the Commissioner had not followed the remand direction: instead of verifying the quantum of proportionate credit reversed, the Commissioner reconsidered the Rule 6 issue and confirmed the demand.

The Tribunal held that this approach was contrary to the remand directions and judicial discipline, and noted that the appellants had reversed proportionate credit.

As the appellants had regularly filed returns, disclosed their clearances and been audited, the Tribunal found no basis to apply the extended period to the demand concerning calendars, cards, envelopes and notebooks; it applied the same limitation reasoning previously adopted for diaries, letter pads and carry bags.

It also allowed cum-duty benefit and found no basis for penalties in the absence of evidence of mens rea.

Excise Appeal No. 70386, filed by Shri Garg, was allowed.

The order granted consequential relief, if any, in accordance with law.