2015 (9) TMI 983 - AT - Central Excise

Reversal of CENVAT Credit - Re-classification of goods - Penalty u/s 11AC - Held that - It is not under dispute that the polymer imported are classifiable under Chapter 39 and the duty is being paid accordingly. Further, the process being undertaken in the factory is only repacking of the goods in smaller container and putting labels. Thus there is no change in the characteristic of the imported goods or the use of the imported goods and thus the process will not amount to manufacture. One has to consider that the goods have been cleared as such. The importer is required to reverse/repay the Cenvat credit taken at the time of importation. However, this was not done. It is also not in dispute in the present case that the Cenvat Credit taken at the time of importation was much higher than the duty paid on the repacked goods and cleared as chemical additives for lubricating oil. Nobody can make out that the credit on inputs taken are falling under Chapter 39. Further, while clearing the goods no description is mentioned and the classification of the goods mentioned is 38. It is not possible from the above description for any human being that the inputs have been cleared as such and the classification of the input have been changed. We do not see any reason for the appellant to change the classification. To our mind, the classification has been changed only to ensure that they are in a position to take higher credit and pay lower duty. In our view, there is clear cut suppression of fact and wilful misstatement and in view of the fact and circumstances, extended period of limitation is correctly invoked. Classification of the product has been changed without any manufacturing process. This fact was in their knowledge and therefore they were aware that the goods are liable to confiscation and they were also concerned with the said goods and in view of the said position, the penalty is imposable on them - However, penalty is reduced - Decided partly in favour of assessee.

Summary

Issues:
Classification of imported goods under Chapter 39, repacking and relabeling process as manufacturing, reversal of Cenvat credit, correct quantification of duty, extended period of limitation, imposition of penalty on employees, applicability of case laws, personal penalties on employees, suppression of facts, wilful misstatement.

Analysis:

Classification of Goods and Manufacturing Process:
The case involved a dispute regarding the classification of imported polymer used for manufacturing lubricants and chemical additives. The appellant engaged in repacking and relabeling activities, claiming the goods as chemical additives under Chapter 38. However, the revenue contended that the goods should be classified under Chapter 39 as the repacking process did not amount to manufacturing. The tribunal upheld the revenue's stance, emphasizing that the repacking process did not alter the characteristics of the goods, leading to the conclusion that the goods were cleared as such. The appellant was directed to reverse the Cenvat credit taken at the time of importation.

Reversal of Cenvat Credit and Correct Quantification of Duty:
The appellant was required to repay the differential amount between the Cenvat credit availed at the time of importation and the duty paid at the time of clearance. The tribunal supported this demand, highlighting that the appellant's self-assessment procedure did not justify the misclassification of goods. The quantification of duty was deemed appropriate, considering the lack of one-to-one correlation between imported and cleared goods.

Extended Period of Limitation and Penalty Imposition:
The tribunal rejected the appellant's argument against the invocation of the extended period of limitation, citing discrepancies in the ER1 returns filed by the appellant. The tribunal also reduced the penalties imposed on employees involved in the misclassification, acknowledging their awareness of the situation. The imposition of penalties was justified based on the employees' involvement in the misrepresentation of facts.

Applicability of Case Laws and Conclusion:
The tribunal dismissed the relevance of the case laws cited by the appellant, emphasizing that the revenue did not aim to deny the Cenvat credit but sought the differential amount owed. Ultimately, the appeals were dismissed, with modifications in the penalty imposed on the employees. The judgment underscored the importance of accurate classification, repayment of credits, and adherence to regulatory procedures to prevent misstatements and penalties.