2009 (11) TMI 797 - AT - Central Excise

Issues Involved:
1. Recovery of Cenvat credit on inputs written off as obsolete.
2. Allegation of clandestine removal of printed circuit boards (PCBs).
3. Demand for duty on worn-out capital goods.
4. Invocation of extended period for demand.
5. Imposition of penalties and interest.

Summary:

1. Recovery of Cenvat credit on inputs written off as obsolete:
The audit revealed that M/s. NSP Electronics Ltd. had written off inputs and capital goods valued at Rs. 18 Crores, involving Cenvat credit of Rs. 2,85,46,601/-, which were not available in stock. The Commissioner found that the assessee had written off these goods in the year 2005-06 and not during 2002-03. The Commissioner relied on CBEC Circular dated 22-2-1995, which mandated the reversal of Modvat credit when inputs were written off. The appellants argued that there was no legal provision prior to 11-5-2007 to recover Cenvat credit on inputs written off as obsolete and that the relevant Rule 3(5B) was inserted in Cenvat Credit Rules, 2004 by Notification No. 36/3007-CE (NT) dated 11-5-2007. The Tribunal found that the Revenue had not shown any evidence that the inputs or capital goods were procured and written off as obsolete and removed from the factory.

2. Allegation of clandestine removal of printed circuit boards (PCBs):
The Commissioner confirmed the demand of Rs. 33,72,163/- towards duty on 24962 pieces of PCBs clandestinely cleared, based on the balance sheet showing these PCBs as written off. The appellants contended that the ER-1 returns for the relevant period showed the balance of finished goods as nil. The Tribunal found that the demand towards clandestine clearance of PCBs could not be sustained as the department had not relied on any evidence except the balance sheet.

3. Demand for duty on worn-out capital goods:
The Commissioner rejected the claim that the assessee had sold worn-out tools on payment of duty, observing that these goods were not available in the factory during the audit in April 2007. The assessee argued that these goods were cleared in December 2007 and January 2008, as reflected in the invoices. The Tribunal found that this aspect needed to be examined afresh and remanded the case for fresh adjudication.

4. Invocation of extended period for demand:
The Commissioner invoked the larger period for demand on the basis that the fact of writing off of PCBs was not made known to the department and the irregularities were detected during the audit in April 2007. The appellants argued that the demand was time-barred as the department had taken notice of the alleged write-off at the time of audit, and the notice was issued beyond the normal period. The Tribunal found that the demand based on balance sheet figures in the absence of evidence of write-off of actual inputs could not be sustained.

5. Imposition of penalties and interest:
The Commissioner imposed penalties under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Act and under Section 11AC being equal to the duty found due on clandestine clearances. A further penalty of Rs. 2,00,000/- was imposed under Rule 25 of the Central Excise Rules, 2002. The Tribunal found that the penalties and interest were not sustainable as the primary demand did not survive.

Conclusion:
The Tribunal vacated the impugned order and remanded the case for fresh adjudication by the Commissioner, directing that the assessee be afforded an effective opportunity to present their case during de novo proceedings. The stay application and appeal were disposed of.

← Previous Next →