2011 (7) TMI 604 - AT - Central Excise

Imported Capital Goods Demand Upheld, Penalties Overturned on Rule Violation Absence

The Tribunal upheld the demand and interest payment related to imported capital goods but rejected the appeal on that aspect. However, the penalties ... Reversal of Cenvat credit of first 50% availed for non installation of the machinery in the factory premises - Held that:- There is no provision of law requiring reversal of Cenvat credit of first 50% availed for non installation or use of the machinery in the factory premises. The demand of duty would not have been sustained, but since the appellant is not contesting the same and as the appellants have already discharged the said confirmed demand along with interest that portion of the order which confirmed the demand and interest on such amount is upheld. Hence, the appeal of the appellant assessee company to that extent is rejected. There being no violation of Rules, the penalties imposed by the adjudicating authority on all the three appellants is unwarranted and is liable to be set aside - partly in favour of assessee. Issues:Appeal against penalty on individuals for non-utilization of imported capital goods and missing parts.Analysis:The appeals were directed against an order related to imported capital goods for installation in a plant. The appellant company procured the goods in December 2002 and claimed 50% credit of CVD paid on the goods after 8 months. A show cause notice alleged non-use of the goods and missing parts, demanding reversal of Cenvat credit. The adjudicating authority confirmed the demand, interest, and imposed penalties on the company and two individuals.The appellant argued that they paid the reversal amount and interest during the proceedings, challenging only the penalty imposition. They contended that they were eligible for the credit and the penalty was wrongly imposed. The Revenue supported the adjudicating authority's findings, citing violations of Cenvat Credit Rules for the penalties.The Tribunal noted that the appellant received the goods in their factory premises, paid the duties, and were eligible for 50% Cenvat credit as per the rules. It was confirmed that the goods were in the premises, with only some parts removed after duty payment. The Tribunal analyzed Rule 4 of the Cenvat Credit Rules, stating that there was no bar to availing 50% credit in the next financial year. They upheld the demand and interest payment but rejected the appeal on that aspect.Regarding penalties, the Tribunal found no rule violation by the appellants for penalty imposition, as they were eligible for the 50% credit. Consequently, the penalties imposed on all appellants were deemed unwarranted and set aside. The appeals were partly allowed based on the above analysis.The Revenue's miscellaneous application for out-of-hearing was disposed of as the appeals had already been addressed comprehensively.