2008 (10) TMI 499 - AT - Central Excise

Summary

Issues:
1. Whether the appellants were justified in paying excess duty on removal of capital goods to sister unit?
2. Whether the penalty imposed on the appellants was valid under Section 11AC of the Act?
3. Whether the invocation of longer period for duty payment was justified?
4. Whether the excess duty payment by the appellants was intentional or inadvertent?
5. Whether the show cause notice contained allegations of fraud?
6. Whether there was a legal obligation to pay duty or reverse Cenvat credit on clearance of used capital goods?
7. Whether the rules regarding reversal of credit for used goods had retrospective effect?

Analysis:

1. The appellants availed Cenvat credit on capital goods in 1997 and later removed them to a sister unit after nearly 6.5 years, paying excess duty due to a change in duty rate. The appellants argued no fraudulent intent, relying on cases where no duty was required on clearance of old machinery.

2. The Original authority imposed a penalty under Section 11AC of the Act, but the Commissioner (Appeals) found no justification for invoking a longer period, stating absence of mens rea. The Commissioner relied on previous decisions to decide the issue on merits.

3. The Revenue contended that the excess duty payment was a clever modus operandi to pass more credit to the sister unit, citing a case where excess credit recovery was upheld. However, the learned Advocate argued the excess payment was unintentional due to duty rate change.

4. The show cause notice did not allege fraud by the appellants, and the Tribunal found no strong reason to disagree with the Commissioner's findings. The Tribunal noted no obligation to pay duty or reverse credit on used capital goods clearance based on relevant case laws.

5. The Tribunal dismissed the Revenue's appeal, emphasizing no justification for penal action or demanding excess duty payment. The Tribunal found the excess payment explained by duty rate differences and ruled against invoking a longer period for duty payment, ultimately dismissing the appeal.

This detailed analysis of the judgment highlights the key issues, arguments presented by both sides, legal interpretations, and the final decision rendered by the Tribunal.