2009 (12) TMI 845 - AT - Central Excise

Summary

Issues:
- Demand of Central Excise Duty on old and used machinery
- Demand of Cenvat credit for inputs purchased
- Imposition of penalty under Cenvat Credit Rules and Central Excise Rules

Analysis:

Issue 1: Demand of Central Excise Duty on old and used machinery
The appellant, a manufacturer of paper, sold old paper machinery along with used transformers. The Department demanded Central Excise Duty amounting to Rs. 5,36,800, contending that duty should have been paid at the time of clearance of old machinery. The appellant argued that no Cenvat credit had been availed for the old machinery purchased in 1980-81. The Tribunal held that the Department failed to provide evidence showing Cenvat credit had been taken. As per Rule 3(4) of Cenvat Credit Rules, duty is payable only if credit had been taken, which was not proven in this case. Therefore, the demand of Rs. 5,36,800 was deemed unsustainable.

Issue 2: Demand of Cenvat credit for inputs purchased
The Department alleged that the appellant issued debit notes for inputs purchased, indicating short receipt and demanded Cenvat credit of Rs. 3684. The appellant claimed the debit notes were for cash discounts, not short receipt. The Tribunal noted that the Department's presumption of short receipt without evidence was insufficient to deny Cenvat credit. As there was no concrete evidence of short receipt, the demand of Rs. 3684 for Cenvat credit was considered unsustainable.

Issue 3: Imposition of penalty under Cenvat Credit Rules and Central Excise Rules
The Asstt. Commissioner imposed a penalty of Rs. 5,40,484 under Cenvat Credit Rules and Central Excise Act. On appeal, the Commissioner (Appeals) upheld the penalty. However, the Tribunal found the penalty unsustainable due to the lack of substantiated claims regarding Cenvat credit and short receipt of inputs. Therefore, the penalty was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demands for Central Excise Duty and Cenvat credit, along with the penalty imposed. The judgment emphasized the importance of concrete evidence and proper substantiation in tax-related claims and penalties under Cenvat Credit Rules and Central Excise Rules.