2006 (12) TMI 60 - AT - Central Excise

Interest - Revenue contended that appellant is removed the input or capital goods from the factory as such, so that they are not entitle for cenvat credit and accordingly confirm demand of penalty and interest Held that revenue contention is wrong and penalty and interest set aside

Summary

Issues:
1. Interpretation of Rule 3(4) of Cenvat Credit Rules, 2002 and Rule 8 of Central Excise Rules, 2002 regarding payment on inputs/capital goods.
2. Validity of show cause notice for recovery of interest and imposition of penalty under Cenvat Credit Rules, 2002.
3. Impact of the amendment in Notification 13/2003-C.E. (N.T.) on payment requirements for inputs/capital goods.
4. Assessment of interest and penalty under Section 11AB of Central Excise Act, 1944.

Analysis:

1. The case involved the interpretation of Rule 3(4) of Cenvat Credit Rules, 2002 and Rule 8 of Central Excise Rules, 2002 concerning the payment obligation on inputs/capital goods removed from the factory. The appellant, engaged in manufacturing excisable goods, was issued a show cause notice for not paying the amount equal to the credit availed on such goods on the date of removal. The Asst. Commissioner confirmed the demand of interest and imposed a penalty, which was later set aside by the Commissioner (Appeals).

2. The Commissioner (Appeals) noted an amendment in Notification 13/2003-C.E. (N.T.) which eliminated the requirement to reassess duty on inputs/capital goods removed after 1-3-2003. The show cause notice incorrectly calculated interest from the date of clearance, contrary to Section 11AB which mandates interest from the first date of the following month when duty should have been paid. Consequently, the demand for interest was deemed unsustainable, leading to the setting aside of the penalty as well.

3. Upon review, it was found that the impugned order by the Commissioner (Appeals) was legally sound, with no merit in the Revenue's appeal. The decision upheld the Commissioner's ruling, indicating that the demand for interest was incorrectly calculated, and the penalty was unjustified given the amended payment requirements for inputs/capital goods.

In conclusion, the judgment clarified the payment obligations for inputs/capital goods under the relevant rules, highlighted the impact of the amendment on payment requirements, and emphasized the correct calculation of interest under Section 11AB. The decision favored the appellant by setting aside the demand for interest and penalty, affirming the Commissioner (Appeals)'s order.