2013 (5) TMI 4 - AT - Central Excise

Tribunal grants relief on procedural lapses and duty evasion, penalties set aside for appellants

The Tribunal found that despite procedural lapses in registration amendments, all manufacturing activities and records were maintained at Appellant No.1's ... Violation of Central Excise procedures - CENVAT credit denial - case of the revenue that manufacturing of DG Sets was being carried out in the factory premises of Appellant No. 1, whereas the Central Excise registration was taken at the name and address of appellant No.2 - as per dept. entire Central Excise duty due on the finished goods has been discharged by the appellants - Held that:- It is clear from the facts that Appellant No.2 was having a very small area in the registered premises which was not sufficient for any manufacturing/ storage activity. During investigation also the premises of Appellant No.2 was visited but neither the finished goods nor raw materials were found present. All the manufacturing activities and the records of Appellant No.2 were being maintained at the factory premises of Appellant No.1. There is nothing on record to show that any goods manufactured at the premises of Appellant No.1 were not made out of raw materials received in the name and address of Appellant No.2. It is established from the above observations that Appellant No.1 and Appellant No.2 have not followed the Central Excise procedures but the inputs have been completely used in the manufacture of final products which are cleared on payment of duty. It is settled law that for failure to follow the procedures, cenvat credit cannot be denied - thus cenvat credit with respect to inputs received in the name and address of Appellant No.2 is admissible to the Appellant No.1 from where the manufactured goods were cleared on payment of duty - no further duty liability is attracted from the appellants once the duty of the finished goods is discharged - enalties imposed upon the appellants under Section 11AC, under Rule 15, Rule 25 & personal penalty upon Shri Manoj C. Phutane, Managing Director are required to be set-aside. Issues involved:Manufacturing of DG Sets in factory premises under different registration, diversion of inputs, non-adherence to Central Excise procedures, duty liability, admissibility of Cenvat credit, penalties imposed, procedural lapses, intention to evade duty.Analysis:1. The primary issue in this case revolves around the manufacturing of DG Sets in the factory premises of Appellant No.1 while having Central Excise registration under the name and address of Appellant No.2. The revenue alleged that Appellant No.2 diverted inputs without reversing Cenvat credit, leading to manufacturing activities at Appellant No.1 without following Central Excise procedures, resulting in a demand for Central Excise duty liability for goods cleared from Appellant No.1's premises.2. The adjudicating authority confirmed demands, confiscated goods, and imposed penalties on both Appellant No.1 and Appellant No.2, along with a significant penalty on the Managing Director of Appellant No.1. The penalties were imposed under various rules of the Central Excise Act, 1944, and Cenvat Credit Rules, 2004, totaling a substantial amount.3. During the appeal, it was argued that due to delays in obtaining necessary certificates and amendments, manufacturing activities were conducted at Appellant No.1's premises despite registration under Appellant No.2. The appellants contended that Central Excise duties were paid properly, records were maintained, and no removal occurred without discharging the duty, challenging the duty demand and penalties.4. The Tribunal observed that all manufacturing activities and records of Appellant No.2 were maintained at Appellant No.1's factory premises, with no evidence of goods being manufactured elsewhere. Despite procedural delays in registration amendments, the inputs received in Appellant No.2's name were utilized in manufacturing at Appellant No.1, with proper Central Excise duties discharged.5. Regarding the admissibility of Cenvat credit, the Tribunal held that although Central Excise procedures were not fully followed, the inputs were entirely used in manufacturing final products cleared after duty payment. Therefore, Cenvat credit for inputs received in Appellant No.2's name was deemed admissible to Appellant No.1, eliminating further duty liability.6. The Tribunal further noted that the penalties imposed for procedural lapses and non-intentional duty evasion were unjustified. Consequently, the penalties on the appellants under various Central Excise rules and on the Managing Director were set aside, and the appeals were allowed with any consequential relief.This comprehensive analysis highlights the key legal aspects, arguments, findings, and conclusions of the judgment, providing a detailed understanding of the case and its implications.