2015 (10) TMI 38 - AT - Central Excise

Denial of CENVAT Credit - metal scrap cleared to job worker without payment of duty - Department was of the view that the metal scrap (steel scrap and brass scrap) is not in the nature of semi-finished/semi-processed goods and as such, cannot be cleared without payment of duty under Rule 4(5)(a) to job workers for conversion into ingots - Held that - even if, the scrap had been cleared on payment of duty, the job workers would have been taken its Cenvat credit and thereafter, would have cleared ingots on payment of duty by utilizing the Cenvat credit and the respondent would have taken the Cenvat credit of the duty paid by the job workers and as such, this would be a revenue neutral situation. In view of the above circumstances, this is not a case which calls for imposition of penalty on the Director and Authorised Signatory under Rule 26 of the Central Excise Rules, which is attracted only when a person is concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner dealing with any excisable goods which he knew or had reason to believe are liable for confiscation and this is not a case where the above elements are present. Therefore, even on merits, penalty on the respondent under Rule 26 of the Central Excise Rules, 1944 is not called for. - Decided in favour of assessee

Summary

Issues:
Interpretation of Rule 4(5)(a) of the Cenvat Credit Rules, 2004 regarding clearance of metal scrap without duty payment to job workers; Imposition of penalty under Rule 26 of the Cenvat Credit Rules, 2002 on the Director and Authorised Signatory of the manufacturing company.

Analysis:

Interpretation of Rule 4(5)(a) of the Cenvat Credit Rules, 2004:
The case involved a dispute regarding the clearance of metal scrap without payment of duty to job workers under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The Department contended that the metal scrap should have been cleared only on payment of duty, while the respondent argued that the scrap could be cleared without duty payment. The Tribunal analyzed the situation and concluded that the issue was a matter of interpretation. It was noted that even if the scrap had been cleared on payment of duty, the job workers would have utilized Cenvat credit to clear ingots, resulting in a revenue-neutral situation. Therefore, the Tribunal found no justification for imposing penalties under Rule 26 of the Central Excise Rules, as the circumstances did not meet the criteria for penalty imposition.

Imposition of Penalty under Rule 26 of the Cenvat Credit Rules, 2002:
The Tribunal further examined the imposition of penalties on the Director and Authorised Signatory of the manufacturing company under Rule 26 of the Cenvat Credit Rules, 2002. It was emphasized that Rule 26 is applicable when a person is involved in activities related to excisable goods that are liable for confiscation. In this case, the Tribunal determined that the elements required for penalty imposition under Rule 26 were not present. Therefore, even on the merits of the case, the Tribunal found no basis for imposing penalties on the respondents. Consequently, the appeals filed by the Revenue challenging the order setting aside the penalties were dismissed by the Tribunal.

In conclusion, the Tribunal dismissed the appeals filed by the Revenue, upholding the order of the Commissioner (Appeals) that set aside the penalties imposed on the Director and Authorised Signatory of the manufacturing company. The Tribunal determined that the issue of clearing metal scrap without duty payment to job workers was a matter of interpretation and did not warrant penalty imposition under Rule 26 of the Cenvat Credit Rules.