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2026 Supreme(Online)(CESTAT) 2559
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL AHMEDABAD REGIONAL BENCH, COURT NO. 2
Ajaya Krishna Vishvesha, Judicial Member
K B ISPAT PVT LTD – Appellant
Versus
CGST & Central Excise Bhavnagar – Respondent
EXCISE APPEAL NO. 10757 OF 2023 | EXCISE APPEAL NO. 10756 OF 2023
For the Appellants/Petitioners: P D Rachchh
For the Respondents: Sarjeet Kumar
Payment of Central Excise duty and interest before the issuance of a Show Cause Notice attracts the proviso to Section 11AC(1)(a) of the Central Excise Act, 1944, which deems all proceedings in respect of said duty and interest as concluded and waives the penalty.
Headnote:The case involves the interpretation of the proviso to Section 11AC(1)(a) of the Central Excise Act, 1944, and the levy of duty on raw materials. The appellant was accused of manipulating payment challans to evade excise duty, procuring raw materials without invoices, and wrongly availing Cenvat credit. The court found that the appellant had paid the disputed duty and interest before the issuance of the Show Cause Notice. It was further observed that the demand for duty on raw materials lying in the factory was unsustainable as duty is leviable only upon the clearance of finished goods. The primary issues were whether the payment of duty and interest prior to the Show Cause Notice concludes all proceedings and waives penalties under Section 11AC(1)(a), and whether the extended period of limitation could be invoked when the department had prior knowledge of the short payment. The court reasoned that according to the proviso to Section 11AC(1)(a), if duty and interest are paid before the Show Cause Notice, no penalty is payable and proceedings are deemed concluded. Furthermore, the court held that the extended period cannot be invoked if the facts were within the knowledge of the department. Both the Appeal are allowed with consequential relief.
| Table of Content |
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| 1. background of excise duty evasion through challan manipulation and cenvat credit errors. (Para 1) |
| 2. arguments regarding pre-scn payment and the applicability of section 11ac. (Para 2 , 3) |
| 3. pre-scn payment of duty and interest concludes proceedings under section 11ac(1)(a). (Para 4) |
| 4. final determination allowing appeals based on statutory payment provisions. (Para 5) |
Dr. AJAYA KRISHNA VISHVESHA
These appeals are directed against the impugned Order-in-Appeal passed by the Commissioner (Appeals) Rajkot dated 22.08.2023 through which the learned Commissioner upheld the Order-in-Original passed by the Adjudicating Authority, Joint Commissioner Central Excise and CGST Bhavnagar dated 13.01.2023 and rejected the appeal.
1.2 The facts of the case in brief are that the appellant K B Ispat Pvt Ltd was engaged in manufacturing of MS Plates and was registered with the Central Excise department. They were availing credit of input / capital goods / input services under the provisions of Cenvat Credit Rules, 2004 and were filing ER-1 returns. The Anti-evasion wing of Central Excise at HQ Bhavnagar carried out simultaneous searches at office premises of the appellant K B Ispat Pvt Ltd and residential premises of the Director of the company Shri Hemant R Vora and factory premises of the company. On the basis of the information that the appellant company was engaged in evasion of Central Excise duty by way of utilizing single Central Excise duty payment challan more than one time for payment of Central Excise duty liabilities in more than one month. It was also gathered that the appellant company was procuring raw materials from local market without cover of invoices and without accounting for same in their financial / statutory records. The search resulted into seizure of incriminating documents under panchnamas dated 22.02.2018.
1.3 The scrutiny of records seized during the search operation revealed that the appellant company had utilized Central Excise duty payment Challan No. 00022880909201600319 dated 09.09.2016 for Rs. 8,00,000/- for payment of their Central Excise duty liability for the month of August-2016. They have deliberately utilized the same Challan of Rs. 8,00,000/- for payment of Central Excise duty for the month of September-2016 again by changing the date as 09.10.2016 as mentioned in their ER-1 returns for the month of September-2016. On verification, it was found that no such Challan dated 09.10.2016 existed and the date of earlier Challan was just changed. Further, Appellant company had utilized Challan No. 00022883103201703974 dated 31.03.2017 of Rs. 10,00,000/- for payment of their Central Excise duty liabilities for the month of March-2017. However, they have deliberately utilized the same Challan of Rs. 10,00,000/- for payment of their Central Excise duty liabilities for the month of May-2017, just by changing its date 31.05.2017 as mentioned in their ER-1 returns for the month of May-2017. On verification, it was found that no such Challan dated 31.05.2017 existed and appellant company had just changed the date of earlier Challan for Rs. 10,00,000/- dated 31.03.2017. The appellant company in their ER-1 returns for the month of June-2017 showed payment vide challan No. 00022881007201700096 dated 10.07.2017 for Rs.10,00,000/- towards their Central Excise duty liabilities for the month of June-2017. While on verification, it was found during further verification that the amount of Rs.10,00,000/- did not match. It was found during further verification that the said challan was tendered for Rs. 1,00,000/- only for Central Excise duty payment and appellant had mis-stated the amount as Rs. 10,00,000/- in their ER-1 returns and defrauded the Revenue by Rs. 9,00,000/-. Further, Appellant company in their ER-1 returns for the month July-2016 showed as utilized Challans of Rs. 1,05,110/- towards their Central Excise duty liabilities for the month of July-2016.
1.4 On scrutiny of ER-1 returns for the above ment
