2010 (4) TMI 941 - AT - Central Excise

Summary

Issues:
- Transfer of duty paid DG set from one unit to another within the same company
- Liability for duty payment and penalties under Cenvat Credit Rules and Central Excise Rules
- Interpretation of Rule 3(5) of Cenvat Credit Rules regarding clearance of capital goods

Analysis:
The case involves an appeal by the Department against an order confirming a demand of duty and penalties imposed on the transfer of a duty paid DG set from one unit to another within the same company. The appellant had taken modvat credit in 1997 and used the set for about eight years before transferring it to another plant. The original authority confirmed the duty demand and penalties, which were partially upheld by the Commissioner (Appeals).

The appellant argued that the transfer was within the same company and did not involve a sale, thus no duty was payable. They relied on precedents to support their position, emphasizing the depreciation value concept introduced later and the treatment of inter-unit transfers within the same company differently. The Department contended that since the DG set was cleared as such, the full credit amount along with interest was recoverable, and penalties were justified.

The Tribunal considered the facts and applicable precedents. It recognized the usage of the DG set for the intended purpose and the importance of not negating the credit on capital goods. Referring to relevant cases, the Tribunal distinguished between different scenarios of goods transfer and upheld the concept of revenue neutrality in certain situations. Ultimately, the Tribunal directed the appellant to pay duty on the depreciated value as per Rule 3(5) of Cenvat Credit Rules.

Regarding penalties, the Tribunal found that the initial credit availed was not irregular, and the question of sustaining the penalty under Rule 15(2) of Cenvat Credit Rules did not arise in this case. Consequently, the appeal was partly allowed, with the appellant instructed to pay duty on the depreciated value and applicable interest, while the penalties were set aside.

In conclusion, the judgment clarified the liability for duty payment on transferred capital goods within the same company, emphasizing the importance of following relevant rules and precedents to determine the appropriate duty amount and penalties in such cases.