Judgment remands case for demand re-quantification, waives penalty, and disposes of the matter.

The judgment remanded the case for re-quantification of the demand amount based on the amended provision, waived the penalty, and disposed of the case accordingly.

---

---

Issues:
1. Appeal against rejection of appeal by Commissioner of Central Excise(Appeals)
2. Availing Cenvat credit on engraving/dechroming/rechroming of cylinders/rollers
3. Rejection of request for reduction in demand amount
4. Imposition of penalty under Rule 25 of Central Excise Rules

Analysis:
1. The appeal was directed against the rejection of the appellant's appeal by the Commissioner of Central Excise(Appeals) who upheld the Order-in-Original dated 30/6/2009. The appellant, engaged in manufacturing activities falling under different chapters of the Central Excise Tariff Act, availed Cenvat credit facility on their inputs, capital goods, and input services. The issue arose when plain cylinders/rollers were purchased by the appellant from vendors not paying Central Excise duty due to their turnover being below one crore. The appellant then cleared these cylinders to vendors for engraving/dechroming/rechroming without payment of duty or reversal of credit. The vendors, after processing, cleared the cylinders by paying duty. The appellant, upon receiving the cylinders back, availed Cenvat credit. The show cause notice contended that the appellant should reverse the Cenvat credit on the engraving process, leading to confirmation of charges and demand of Cenvat credit by the Adjudicating authority along with a penalty under Rule 25 of Central Excise Rules.

2. The appellant argued that the period in question fell after the amendment in Rule 3 of Cenvat Credit Rules, 2004, requiring payment equal to Cenvat credit on capital goods reduced by 2.5% for each quarter. The appellant requested the reduction in the demand amount based on this provision. The Revenue, represented by the Superintendent, supported the findings of the impugned order and opposed the appellant's request for reduction, citing lack of information provision.

3. Upon careful consideration, the Member(Judicial) found that the period in question was post-amendment, warranting the application of the amended provision for quantifying the demand of duty on capital goods. The Member disagreed with the Commissioner's decision to not extend the reduction to the appellant due to lack of information provision. The matter was remanded to the Adjudicating authority to re-quantify the demand amount following the proviso to Rule 3(5) of Cenvat Credit Rules, 2004. Additionally, the Member noted the contentious nature of the issue even before the amendment, opining that penalty imposition was unwarranted based on the legal position at that time, thus waiving the penalty.

4. In conclusion, the judgment remanded the matter for re-quantification of the demand amount based on the amended provision, waived the penalty considering the legal position, and disposed of the case accordingly.

---