2005 (6) TMI 393 - AT - Central Excise

Tribunal overturns duty demand on inputs, upholds demand on capital goods. Penalty revoked due to appellants' bona fide belief.

The tribunal set aside the duty demand on inputs but upheld the duty demand on capital goods removal. The penalty imposed on the appellants was also set ... Cenvat/Modvat - Penalty Issues:Contesting duty on inputs and capital goods removal, interpretation of Rule 57AB, applicability of duty on capital goods removal, imposition of penalty.Contesting Duty on Inputs:The appeal contested the correctness of the duty confirmed on inputs and capital goods removed by the appellants. The tribunal noted that the appellants removed defective inputs after reversing the credit taken by them. The Revenue argued that duty should be paid on the assessable value determined under Section 4 of the Act. However, the tribunal referred to an amendment to Rule 57AB effective from 1-3-2001, which stated that duty should be paid on the assessable value determined under Section 4 of the Act and at the applicable Tariff rate for removal of inputs and capital goods. The tribunal cited precedent cases to support the position that prior to the amendment, only credit needed to be reversed for inputs removal. Therefore, the demand for duty on inputs under the amended provision of Rule 57AB was deemed unsustainable, and the duty demand was set aside.Interpretation of Rule 57AB - Capital Goods Removal:Regarding the removal of capital goods, the tribunal found the duty demand legally sustainable for the period from March 2000 to June 2000. The appellants argued that since they had availed only 50% of the credit at the time of removal, duty at the tariff rate under Section 4 of the Act could not be demanded. However, the tribunal held that Rule 57AB required payment of duty at the applicable tariff rate for the removal of capital goods after 1-3-2000, irrespective of credit availed. The tribunal upheld the duty demand of Rs. 5523 on capital goods removal during the specified period.Imposition of Penalty:The learned counsel contended that the penalty imposed on the appellants should be dropped due to the circumstances and the belief that only credit reversal was required, not duty payment. The tribunal agreed, stating that there was no intention to evade duty, and the non-payment was due to an improper interpretation of Rule 57AB. The penalty was set aside based on the appellants' bona fide belief and the facts of the case.Conclusion:In conclusion, the tribunal modified the impugned order, setting aside the duty demand on inputs but upholding the duty demand on capital goods removal. The penalty imposed on the appellants was also set aside considering the circumstances and the belief held by the appellants. The appeal was disposed of accordingly.