2009 (11) TMI 720 - AT - Central Excise

Summary

Issues:
1. Transfer of Cenvat credit during factory relocation
2. Imposition of penalties under Rule 25 of Central Excise Rules

Transfer of Cenvat credit during factory relocation:
The appellant, a manufacturer of excisable goods, shifted their factory to a new location within the same Central Excise Range. Before the relocation, they informed the jurisdictional Asstt. Commissioner as required. Upon shifting, they transferred the balance of Cenvat credit to the new location and availed fresh Cenvat credit for inputs. The Department issued a show-cause notice for recovery of Cenvat credit and penalties for alleged violations. The Asstt. Commissioner confirmed the demand and imposed penalties under Rule 25 of Central Excise Rules and Rule 13(2) of Cenvat Credit Rules. The Commissioner (Appeals) set aside the Cenvat credit demand, noting no irregular or fraudulent availment, but upheld penalties. The appellant appealed challenging the penalty imposition.

Imposition of penalties under Rule 25 of Central Excise Rules:
The appellant argued that no penalty should be imposed as there was no irregular utilization of Cenvat credit and no violation of Rule 9(1) or 9(3). The appellant contended that the relocation within the same range did not require an amendment to the registration certificate. The Department defended the penalties, citing violations of Rule 9 conditions and Notification No. 35/2001-C.E. (N.T.). The Tribunal considered the submissions and records, noting that the locations were within the same range, and the appellant had informed the authorities before relocation. The Commissioner (Appeals) dropped the Cenvat credit demand but upheld the penalty under Rule 25, citing contravention of Rule 9 provisions. The Tribunal analyzed Rule 9 requirements and the Board's notification, finding no contravention by the appellant. It held that the penalty under Rule 25 was unsustainable, as the appellant did not contravene provisions with an intention to evade duty, especially when the Cenvat credit demand was set aside. Consequently, the penalty under Rule 25 was set aside, and the appeal was allowed.

Conclusion:
The Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Rule 25 of Central Excise Rules, as the appellant did not contravene any provisions with an intention to evade duty, especially when the Cenvat credit demand was dropped. The decision highlighted the importance of compliance with Rule 9 conditions during factory relocations within the same range under the Central Excise Rules.