2017 (7) TMI 897 - AT - Central Excise

Appellate Tribunal rules for manufacturers in capital goods diversion case

Texair Versus Commissioner of Central Excise, Coimbatore

Texair Versus Commissioner of Central Excise, Coimbatore - TMI Issues: Alleged diversion of capital goods for manufacturing exempted goods, falsification of documents, denial of cenvat credit, demand of differential excise duty on component washing machine, imposition of penalties.Analysis:1. The case involved the appellants, manufacturers of Plastic Injection Moulding Machines, who were found manufacturing Aluminium components for another company on job work basis without informing the Department and claiming duty exemption without maintaining proper records. The appellants were also accused of diverting machine tools for manufacturing exempted goods and falsifying documents related to the machinery. A show cause notice was issued proposing disallowance of cenvat credit, demand of differential duty, confiscation of seized goods, and imposition of penalties under Central Excise law.2. The original authority confirmed the proposals, leading to confiscation of goods, imposition of penalties, and a subsequent dismissal of appeal by the Commissioner (Appeals). The appellants challenged the jurisdiction of the visiting officers, which was countered by clarifications from the Department regarding permission for the visit. The matter was advised to be argued on merits.3. During the hearing, the appellants argued on various grounds, including the existence of additional premises known to the Department, lack of evidence on exclusive use of capital goods for exempted goods, and the status of the component washing machine as still under development and not marketable. The Department supported the impugned order, emphasizing the use of capital goods for exempted goods, the demand for the washing machine based on valuation, and discrepancies in challans.4. The Tribunal analyzed the contentions and evidence presented. It noted the appellant's challenges to the allegations of using capital goods exclusively for exempted goods and the status of the washing machine as a prototype under development. The Tribunal found merit in the appellant's arguments, especially regarding the innovation process and the lack of evidence of completed sales or regular use of the washing machine.5. Ultimately, the Tribunal ruled in favor of the appellant, setting aside the impugned order, allowing the appeal, and providing consequential relief as per the law. The decision was based on the lack of sufficient evidence to support the allegations of diversion of capital goods, the status of the washing machine, and the technical nature of the challan discrepancies within the prescribed return period.6. The judgment was pronounced on 25.07.2017 by the Appellate Tribunal CESTAT Chennai, with detailed analysis and considerations of the arguments presented by both parties, ultimately leading to a favorable outcome for the appellant based on the lack of substantial evidence supporting the Department's claims.