2010 (8) TMI 342 - AT - Central Excise

Cenvat credit Capital goods - entitlement of the assessee to capital goods credit paid on Aluminium tables received by it, Aluminium tables received by the appellants were classified under Chapter Heading 8537 - appellants had availed credit of duty paid - Commissioner disallowed credit on the ground that such goods were classifiable under Chapter Heading 9403 and such goods were not covered by the definition of capital goods - classification of the goods cannot be changed at the receiver s end by the Central Excise authority - order of the Commissioner, vacated as regards the denial of capital goods credit Cenvat credit Recovery of cenvat credit wrongly taken - they had not utilized the impugned credit and there was sufficient balance in their Cenvat credit account at all times - liability to interest not arise. Penalty - They had reversed the credit of ₹ 6,05,627 only on being pointed out by the audit party. - No evidence to support a conclusion that the assessee had availed credit of ₹ 6,05,627 with intention to evade payment of duty. - The assessee had not utilize the impugned credit. - penalty vacated.

Summary

Issues Involved:
1. Entitlement to capital goods credit on Aluminium tables.
2. Liability to interest for delayed reversal of inadmissible Cenvat credit.
3. Imposition of penalty under Rule 13 of the Cenvat Credit Rules read with section 11AC of the Central Excise Act.

Issue-wise Detailed Analysis:

1. Entitlement to Capital Goods Credit on Aluminium Tables:
The appellants argued that Aluminium tables were classified under Chapter Heading 8537 and they availed credit based on Central Excise invoices. The Commissioner disallowed the credit, reclassifying the tables under Chapter Heading 9403, which does not cover capital goods. The Tribunal noted that the Commissioner overstepped jurisdiction by reclassifying goods already assessed under a different jurisdiction. Citing multiple case laws, the Tribunal held that the classification could not be altered at the receiver's end. Thus, the Tribunal vacated the denial of capital goods credit amounting to Rs. 1,52,440.

2. Liability to Interest for Delayed Reversal of Inadmissible Cenvat Credit:
The appellants contended that they had sufficient Cenvat credit balance and did not utilize the wrongly availed credit. The Tribunal referred to the Punjab & Haryana High Court's judgment in Ind-Swift Laboratories Ltd., which stated that interest is payable only when the credit is wrongly utilized, not merely taken. Since the appellants did not utilize the credit, the Tribunal vacated the demand for interest.

3. Imposition of Penalty under Rule 13 of the CCR read with Section 11AC of the Act:
The appellants argued against the penalty, stating there was no intention to evade duty, and errors were identified and rectified by internal audits. The Tribunal emphasized that penalties under Rule 13 and Section 11AC require proof of fraud, wilful mis-statement, or suppression of facts with intent to evade duty. The Tribunal found no evidence of such intent, noting that the credit was not utilized and was reversed promptly when identified. Consequently, the Tribunal vacated the Rs. 6,00,000 penalty.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal. The denial of capital goods credit on Aluminium tables, the demand for interest, and the imposition of penalty were all vacated, favoring the appellants.