2011 (1) TMI 243 - AT - Central Excise

Demand of duty and penalty Capital goods removed to sister concern - appellants reversed an amount equal to 50% of the credit amount which was taken - department demanded full amount of duty on the capital goods - duty demand against the appellants is justified in terms of the provisions of Rule 57AB (1C) of the Central Excise Rules 1944 in view of the fact that the appellants after taking 50% credit on the impugned capital goods have removed the same to their sister unit Penalty set aside

Summary

Issues: Duty demand on capital goods, eligibility for credit, penalty imposition

Duty Demand on Capital Goods:
The case involved an appeal concerning the duty demand on capital goods that were initially availed for 50% credit by the appellants but later removed to their sister concern. The advocate for the appellants argued that the demand for the full duty amount was not justified since only 50% credit was taken. On the other hand, the SDR contended that the appellants violated the conditions for availing the remaining 50% credit, as specified in Rule 57AC. Additionally, under Rule 57AB (1C), when capital goods were removed, an amount equal to the excise duty leviable on such goods was required to be paid. The Tribunal found the duty demand justified under Rule 57AB (1C) as the appellants removed the capital goods to their sister unit after availing 50% credit, thus confirming the demand with interest.

Eligibility for Credit:
The eligibility for credit on capital goods was a crucial aspect of the case. Rule 57AC allowed for 50% credit in the first financial year, with conditions for availing the remaining 50% credit in subsequent years. The SDR argued that the appellants failed to meet the conditions for the remaining credit as the capital goods were removed to the sister unit. Consequently, the Tribunal upheld the denial of the remaining 50% credit based on the violation of the specified conditions under Rule 57AC.

Penalty Imposition:
Regarding the imposition of a penalty, the appellants contended that they believed only the amount of credit taken needed to be reversed, thus seeking the setting aside of the penalty. The Tribunal, after considering the circumstances, held that the imposition of a penalty was not warranted in this case. Consequently, the penalty imposed on the appellants was set aside, while affirming the duty demand with interest. The appeal was partly allowed, with the duty demand upheld but the penalty being waived.

This detailed analysis of the judgment provides insights into the issues of duty demand on capital goods, eligibility for credit, and penalty imposition, highlighting the arguments presented by both sides and the Tribunal's findings on each issue.