2009 (2) TMI 546 - Commissioner - Central Excise

Issues Involved:
1. Inadmissibility of Cenvat credit on capital goods.
2. Procedural lapses in the removal of capital goods.
3. Alleged suppression of facts by the appellant.
4. Imposition of penalties on the appellant and co-appellant.
5. Applicability of the extended period under proviso to Section 11A of the Act.

Detailed Analysis:

1. Inadmissibility of Cenvat Credit on Capital Goods:
The appellant was accused of availing inadmissible Cenvat credit of Rs. 4,96,862/- on capital goods sent to a job worker and not returned within 180 days. The adjudicating authority confirmed the credit demand along with interest and imposed penalties under Rule 15 of the Cenvat Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944. The appellant contended that they followed the procedure under Rule 4(5)(a) and produced challans for the removal and return of the goods. The Tribunal found that the appellant demonstrated compliance with the rule by producing challans and Form V Register entries, showing the goods were sent and returned within the stipulated period. The Tribunal held that the credit could not be denied based on procedural lapses, citing decisions in similar cases where substantial benefits were upheld despite minor procedural lapses.

2. Procedural Lapses in the Removal of Capital Goods:
The department alleged that the appellant did not follow the procedure under Rule 4(5)(a) and that the challans were prepared post-facto. The appellant argued that the challans were produced before the audit and Range Office and that the rule does not prescribe a specific format for challans. The Tribunal accepted the appellant's contention, noting that the challans and Form V Register entries supported the appellant's claim. The Tribunal emphasized that procedural lapses should not deny substantial benefits, referencing the decisions in CCE, Chennai v. ITC Ltd. and Indian Aluminium Co. Ltd. v. CCE, Ranchi.

3. Alleged Suppression of Facts by the Appellant:
The department invoked the proviso to Section 11A, alleging suppression of facts by the appellant. The appellant argued that the SCN was issued based on records produced during the audit, and there was no independent evidence of suppression. The Tribunal agreed with the appellant, stating that when the allegation of inadmissible credit arises from records produced by the appellant, the question of suppression does not arise. The Tribunal held that invoking the extended period under proviso to Section 11A was not justified.

4. Imposition of Penalties on the Appellant and Co-Appellant:
The adjudicating authority imposed equal penalties on the appellant and a personal penalty of Rs. 25,000/- on the co-appellant under Rule 15 of the Rules read with Section 11AC of the Act. The appellant contended that the penalties were not warranted as there was no conclusive evidence of wrongdoing. The Tribunal found that the appellant acted in good faith and followed the procedural requirements to the extent possible. The Tribunal held that the imposition of penalties was not justified, particularly since Rule 15 applies to manufacturers, and the co-appellant was not a manufacturer.

5. Applicability of the Extended Period under Proviso to Section 11A of the Act:
The appellant argued that the SCN was issued almost a year after the audit, and the extended period under proviso to Section 11A was not applicable without conclusive evidence of suppression. The Tribunal agreed, stating that the demand was based on records produced by the appellant, and there was no independent evidence of suppression. The Tribunal held that the extended period could not be invoked, and the demand was time-barred.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order. The Tribunal found that the appellant followed the procedural requirements, and there was no conclusive evidence of suppression or wrongdoing. The denial of Cenvat credit, imposition of penalties, and invocation of the extended period were not justified. The Tribunal emphasized that minor procedural lapses should not deny substantial benefits and upheld the appellant's contentions.

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