2002 (9) TMI 663 - AT - Central Excise

Tribunal rules for appellant on duty, sets aside penalty, emphasizes credit reversal, overturns penalty and interest.

The Tribunal partially allowed the appeal, ruling in favor of the appellant regarding the demand of duty on capital goods under Rule 57S(1) but setting ... Demand - Jurisdiction - Modvat - Limitation - Modvat/Cenvat – Modvat on capital goods Issues:1. Demand of duty on capital goods and imposition of penalty.2. Applicability of Rule 57U and Sections 11AC and 11AB.3. Interpretation of Rule 57S regarding removal of capital goods.4. Shifting of factory impacting duty demand and penalty imposition.Issue 1 - Demand of duty on capital goods and imposition of penalty:The appellant, a manufacturer of excisable goods, had taken credit of duty paid on capital goods for manufacturing its final product. A notice was issued demanding duty on the capital goods removed from the factory, alleging non-reversal of credit as required by Rule 57S(1). The Commissioner confirmed the demand, imposed penalty under Rule 57U, and ordered interest recovery under the same rule. The appellant argued that the credit was rightly taken and had been utilized in finished goods, not cleared for home consumption but shifted to another plant. The Tribunal held that duty was required as per Rule 57S(1) and set aside the penalty imposed under Rule 57U.Issue 2 - Applicability of Rule 57U and Sections 11AC and 11AB:The appellant contended that Rule 57U applies only in case of errors or omissions, not applicable here. The Commissioner invoked Rule 57U despite proposing recovery under Sections 11AC and 11AB. The Tribunal noted that the circulars relied upon post-amendment to Section 11A did not affect the demand for duty. The imposition of penalty and interest under Sections 11AC and 11AB before their enactment in 1996 was set aside based on legal precedents.Issue 3 - Interpretation of Rule 57S regarding removal of capital goods:The Tribunal interpreted Rule 57S to apply when capital goods are removed for home consumption, including shifting within the same owner's factories. The Tribunal rejected the argument that such removal did not constitute home consumption, emphasizing that the credit utilization in final products did not exempt the reversal requirement. The provision allowed shifting under certain conditions, but did not negate the duty payment requirement.Issue 4 - Shifting of factory impacting duty demand and penalty imposition:The appellant's factory shifting was documented, but the Tribunal clarified that such actions did not affect the duty demand under Rule 57S(1). The provisions allowed shifting with credit transfer, but the duty payment obligation remained. The penalty imposed under Rule 57U was deemed unsustainable due to the timing of its statutory communication.In conclusion, the appeal was partially allowed, addressing the various legal aspects and interpretations of rules and precedents involved in the case.