Factory inspection needed to verify imported capital goods before penalty could stand under CENVAT credit rules.

Penalty under Rule 15(2) of the CENVAT Credit Rules, read with Section 11AC of the Central Excise Act, was held unsustainable at this stage because the core question was whether the spectrometer in the factory was the same machine imported under the relevant Bill of Entry. The Tribunal noted that this could be verified only through factory inspection and identification by officers. If the assessee established that the machine present was the imported capital good, the basis for alleging non-receipt or suppression would fall away and penalty would not be justified. The adjudication was therefore set aside and the matter remitted for fresh decision after inspection and hearing.

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Issues: Whether the penalty imposed under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was sustainable, or whether the matter should be remanded for inspection of the factory to verify the presence and identity of the imported capital goods.

Analysis: The dispute turned on whether the spectrometer found in the factory was the very machine imported under the relevant Bill of Entry. The Tribunal found that this question could be resolved only after officers inspected the factory and satisfied themselves about the availability and identity of the machine. If the assessee established that the machine in the factory was the one imported on the stated date, the foundation for alleging non-receipt or suppression would disappear and penalty would not be justified. The adjudication was therefore set aside and the matter was sent back for fresh decision after inspection and hearing.

Conclusion: The penalty order was not sustained at this stage and the matter was remitted to the adjudicating authority for fresh adjudication after factory inspection and grant of reasonable opportunity of hearing.

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