2009 (11) TMI 762 - AT - Central Excise

Summary

Issues:
1. Duty demand on tractor parts manufactured on job work basis.
2. Imposition of penalty under Rule 25 of Central Excise Rules.
3. Allowance of Cenvat credit on rough forgings.

Analysis:

1. Duty Demand on Tractor Parts:
The respondent manufactured tractor parts chargeable to Central Excise Duty under a specific sub-heading and availed Cenvat credit for inputs and capital goods. They received rough forgings for processing on a job work basis from another company. However, due to changes in duty exemption laws, the parts manufactured by the respondent were no longer exempt from duty. A show cause notice was issued for recovery of short-paid duty. The Assistant Commissioner confirmed the duty demand, interest, and imposed a penalty. The Commissioner (Appeals) upheld the duty demand but allowed Cenvat credit and set aside the penalty.

2. Imposition of Penalty under Rule 25:
The Departmental Representative argued against setting aside the penalty, stating discrepancies in invoice quantities and non-eligibility for duty exemption. The Counsel for the respondent contended that the duty demand was paid before adjudication, and there was no deliberate evasion of duty. The judge analyzed the circumstances and held that while penalty under Section 11AC could not be imposed, a penalty under Rule 25 was warranted for removal of excisable goods without payment of duty. A penalty of Rs. 20,000 was imposed.

3. Allowance of Cenvat Credit on Rough Forgings:
The respondent sought Cenvat credit on duty paid for the rough forgings received. The judge ruled that Cenvat credit would be available for duty paid on the rough forgings since the finished products were not exempt. However, the credit would be restricted to the actual quantity received from the supplier and only if the supplier had not availed Cenvat credit. The matter was remanded to the Assistant Commissioner to quantify the Cenvat credit available to the respondent.

In conclusion, the appeal was disposed of with the imposition of a penalty under Rule 25, allowance of Cenvat credit on actual quantities received, and a remand for quantification of the credit.