2010 (6) TMI 400 - AT - Central Excise

Tribunal reverses penalties for late return, stresses credit timing.

The tribunal set aside the penalties imposed on the appellants for delayed return of processed goods beyond 180 days, emphasizing the importance of ... Interest – cenvat credit – Input sent for job work - inputs cleared for processing under Rule 4(5) of the Cenvat Credit Rules, 2002, have all been received back, after 180 days - claim of the appellants that they had sufficient credit in their account is true, then there is no justification for ordering recovery of interest - factual verification as to whether there was sufficient credit in the accounts of the appellants so as to refrain from ordering recovery of interest, the matter requires to be sent back – Matter remanded Issues:Appeal against order regarding reversal of Cenvat credit for delayed return of processed goods beyond 180 days and imposition of interest and penalty.Analysis:1. The appellant, a manufacturer of capital machinery, availed Cenvat credit for inputs and capital goods and outsourced some processes to job workers. Some processed goods were returned beyond the 180-day period, leading to reversal of credit and imposition of interest and penalties by the original authority, upheld by the Commissioner.2. The Authorized Representative argued that the delays were due to operational reasons faced by job workers, with no deliberate violations. They maintained sufficient credit in their Cenvat account during the disputed period and did not derive any monetary benefit from the delay. Thus, they contested the interest and penalties imposed.3. The SDR contended that the appellant failed to bring back processed goods within 180 days, necessitating credit reversal. The failure to meet this condition rendered them liable for interest and penalties under the Cenvat Credit Rules, 2002.4. The tribunal observed that all inputs cleared for processing were eventually received back, even if delayed in some cases. The original authority confirmed the fulfillment of duty payment requirements voluntarily. However, the issue of sufficient credit in the appellant's account to avoid interest recovery was not raised earlier, necessitating factual verification.5. The tribunal acknowledged the importance of reversing credit within 180 days as a safeguard against misuse of the Cenvat credit scheme. Despite the delay in returning goods, the fact that the consignments were eventually received back, and credit reversed voluntarily, led to the setting aside of penalties imposed.6. Consequently, the tribunal set aside the penalties on the appellants and remanded the matter regarding interest recovery for fresh consideration. The decision emphasized the need for factual verification on the sufficiency of credit in the appellant's account to determine the justification for interest demand.This detailed analysis of the judgment highlights the key arguments, considerations, and decisions made by the tribunal regarding the reversal of Cenvat credit, interest, and penalties in the case.