2015 (8) TMI 1370 - AT - Central Excise

Liability of interest - Rule 14 of CCR - CENVAT credit - denial on the ground that capital goods were installed outside the factory premises - Held that - Rule 14 has the application only when the cenvat credit has been taken or utilized wrongly - In the present case, there is no whisper in the Adjudication Order that the credit has been taken wrongly by the appellant. In absence of any wrong availment of the cenvat credit, Rule 14 cannot be invoked for confirmation of the interest liability. Clandestine removal - air handling units - Held that - It is an admitted fact on record that the Department has not produced any evidence to substantiate the clandestine removal in the present case. No findings have been recorded as to who are the buyer of the clandestinely removed goods, the receipt of consideration towards sale of those clandestinely removed goods etc - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of cenvat credit on capital goods installed outside factory premises, duty demand for alleged clandestine removal of air handling units.

Analysis:

1. Cenvat Credit Denial:
The appellant, a manufacturer of excisable goods, faced denial of cenvat credit on capital goods installed outside the factory premises. The central issue revolved around the location of the installed capital goods, adjacent to the factory but not within the approved premises. The Adjudicating Authority acknowledged the technical violation due to taking cenvat credit before amending the registration certificate but dropped the duty and penalty, yet confirmed interest liability. The Tribunal found the interest demand unsustainable as Rule 14 of the Cenvat Credit Rules applies only when credit is wrongly taken or utilized. Since no evidence suggested wrongful availment of cenvat credit, the interest liability confirmation was deemed inappropriate.

2. Alleged Clandestine Removal:
Another crucial issue was the duty demand against the appellant for the alleged clandestine removal of air handling units from the factory without payment of Central Excise duty. The appellant's Director explained the shortage as a result of incorrect reporting in the daily stock register, not clandestine removal. Despite the voluntary statement regarding duty deposit, the Department failed to provide evidence supporting the clandestine removal claim. The Tribunal emphasized the lack of evidence regarding the buyers, consideration received, or any corroboration of the alleged removal. Consequently, the charge of clandestine removal was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal in favor of the appellant.

In conclusion, the judgment addressed the issues of cenvat credit denial on capital goods installed outside the factory premises and the duty demand for alleged clandestine removal of goods. It highlighted the importance of evidence and proper application of rules in determining liabilities, ultimately ruling in favor of the appellant due to insufficient proof of clandestine removal and incorrect application of interest liability.