2013 (12) TMI 167 - AT - Central Excise

Tribunal revokes penalty on appellant for transfer of capital goods under Cenvat Credit Rules

The Tribunal set aside the penalty imposed on the appellant under Section 11AC and Rule 15 of the Cenvat Credit Rules, finding that the transfer of ... Penalty for wrongful availing of Cenvat credit under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 - Revenue neutrality as a defence to penalty - Transfer of capital goods to sister units and effect on Cenvat creditPenalty for wrongful availing of Cenvat credit under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 - Revenue neutrality as a defence to penalty - Transfer of capital goods to sister units and effect on Cenvat credit - Whether the penalty imposed under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 is sustainable where capital goods, on which Cenvat credit was availed, were transferred to the assessee's sister units within the same Commissionerate and the credits were ultimately accounted for between the units. - HELD THAT: - The Tribunal framed the determinative question as one of revenue neutrality. It is undisputed that the appellant had correctly availed Cenvat credit on capital goods and that such capital goods were transferred to the appellant's own sister units (unit Nos. 2 and 3) within the same Commissionerate. The appellant produced closing balances and evidence that the sister units had taken and subsequently reversed the credit so that the credit ultimately resided with the original unit, which indicates those sister units were registered and availing Cenvat credit. On this factual matrix there was no clearance to a third party and no finding of evasion of duty. The conclusion reached is that the transaction was revenue neutral and, in the absence of any intention to evade duty, the imposition of penalty under Section 11AC (read with Rule 15) could not be sustained. Applying the doctrine that revenue neutrality is a strong ground for setting aside penalty where no evasive intent is shown, the impugned order upholding the penalty was set aside. [Paras 6, 7, 8, 9, 10]Penalty under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 is set aside on the ground of revenue neutrality; appeal allowed.Final Conclusion: The impugned order upholding penalty under Section 11AC read with Rule 15 is set aside on the basis that transfer of capital goods to the assessee's sister units within the same Commissionerate and subsequent accounting of credit rendered the case revenue neutral; appeal allowed with consequential relief. Issues:- Imposition of penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15 of the Cenvat Credit Rules, 2004.Analysis:1. The appellant availed Cenvat credit on capital goods procured in 2005-06 and 2006-07, following a specific procedure. A show cause notice was issued due to capital goods not being returned to the appellant's unit within 180 days. The Additional Commissioner confirmed demands and penalties. The first appellate authority rejected the appeal, leading to the matter being remanded back to the Commissioner (Appeals) by the Tribunal. The Commissioner (Appeals) upheld the penalty of Rs. 8,25,450 imposed on the appellant. 2. The appellant argued that the penalty was unjustified as the capital goods were transferred to their own units within the same Commissionerate, and the sister units were registered with the Central Excise Authority. The appellant maintained that there was no intention to evade duty, emphasizing revenue neutrality. The Revenue contended that the procedures under the Cenvat Credit Rules were not followed by the appellant.3. The Tribunal analyzed the case considering the issue of upholding the penalty under Section 11AC of the Central Excise Act read with Rule 15 of the Cenvat Credit Rules. It was established that the appellant correctly availed Cenvat credit on the capital goods and transferred them to their sister units within the same Commissionerate. The Tribunal noted that the appellant had provided evidence of the sister units being their own units and that the issue could be decided based on revenue neutrality.4. The Tribunal found that since the capital goods were transferred for job work to the appellant's own units, there was no evasion of duty. The Tribunal agreed with the appellant's argument that the entire issue was revenue neutral, as the units involved were registered with the Central Excise Authority. Consequently, the Tribunal set aside the penalty imposed on the appellant under Section 11AC and Rule 15 of the Cenvat Credit Rules.5. In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and the penalty imposed on the appellant. The decision was based on the principle of revenue neutrality and the lack of intention to evade duty in the case at hand. The judgment was pronounced on 19-4-2013 by the Tribunal.