2015 (11) TMI 1551 - AT - Central Excise

Imposition of penalty - Rule 209A of the Central Excise Rules - acquisition of water treatment Plant and their filing of declaration under Rule 57 T to avail credit on capital goods, which will be used in the manufacture of water treatment Plant, and as the activity amounts of manufacture - evasion of duty - Held that - in the case of erection of water treatment Plant, this Tribunal have held, designing supplying the components and erecting the water treatment Plant at the site of assessee/appellant, the said activity is not leviable to Central Excise duty as the water treatment plant is immovable. In this view of the matter when the water treatment Plant itself is not taxable, there is no question of imposition of penalty on the appellant under the provisions of Rule 209A of Central Excise Rules, 1944. - Decided in favour of appellant

Summary

Issues:
1. Penalty under Rule 209A of the Central Excise Rules confirmed against the appellant.
2. Liability of the appellant for penalty under Rule 209A for getting the water treatment plant erected without payment of Central Excise duty.
3. Adjudication of penalty under Rule 209A by the Commissioner (Appeals) and confirmation of penalty.
4. Appellant's appeal before the Tribunal challenging the penalty imposition.

Analysis:
1. The appellant, engaged in the manufacture of Fertilizer catalyst, got a water treatment Plant erected by Ion Exchange (India) Ltd. The Central Excise authority found that Ion Exchange had supplied and erected the entire water treatment plant components, leading to a belief that Ion Exchange was liable for Central Excise duty, which they had not paid. Consequently, the appellant was held liable for penalty under Rule 209A for getting the plant erected without paying Central Excise duty.

2. The appellant contested the show cause notice, arguing against the penalty imposition both on merits and limitation grounds. The Order-in-Original imposed a penalty of Rs. One lakh under Rule 209A. The Commissioner (Appeals) upheld the penalty, citing the appellant's acquisition of the plant and filing of declaration under Rule 57 T as evidence of intention to evade duty. The appellant then appealed before the Tribunal, challenging the penalty confirmation.

3. The appellant's counsel argued before the Tribunal that the erected water treatment plant should be considered 'immovable' based on previous Tribunal rulings and Larger Bench decisions. It was contended that the activities carried out by Ion Exchange did not amount to manufacturing, and hence, the plant was not subject to Central Excise duty. The reliance on CBEC Circular and the nature of the activities carried out by Ion Exchange were crucial arguments in favor of setting aside the penalty.

4. After considering the arguments from both sides, the Tribunal found that the activity of erecting the water treatment plant did not attract Central Excise duty as the plant was deemed 'immovable.' As the plant itself was not taxable, the imposition of penalty under Rule 209A on the appellant was deemed unnecessary. Therefore, the Tribunal allowed the appeal, setting aside the impugned order confirming the penalty.