2015 (11) TMI 830 - AT - Central Excise

CENVAT Credit - Capital goods - Held that - Adjudicating authority in his order dropped the proceedings in respect of recovery of demand of reversal of cenvat credit. However, he demanded the interest. On perusal of the DC letter dt. 20.7.2001 addressed to the appellant, where the appellant applied for debonding on 30.3.2001, final debonding order was issued and appellant was allowed to operate as DTA unit with effect from 1.4.2001. Subsequently, the Development Commissioner clarified that appellants have been permitted to operate as DTA unit on 31.3.2001 instead of 1.4.2001 as they have completed Central Excise formalities on 30.3.2001 itself. In view of the Development Commissioner's letter allowing for debonding of EOU, the DTA unit of the appellants have reversed the credit on 30.3.2001 itself and the Development Commissioner in the above letter has also approved debonding w.e.f. 31.3.2001. Therefore, the question of demand of interest and imposition of penalty does not arise and also find that there was no removal of capital goods till the same unit becomes the DTA unit. There was no physical removal or clearance of capital goods or excisable goods. I find that the adjudicating authority instead of taking the date as 31.3.2001 has taken the date of debonding as 14.8.2001 which is not correct. Hence I hold that appellants are not liable for any interest or penalty. Accordingly, the impugned is set aside - Decided in favour of assessee.

Summary

Issues:
- Appeal against Commissioner (Appeals) order dated 27.5.2005 regarding reversal of credit on capital goods upon debonding of a unit, imposition of interest, and penalty.

Analysis:
1. Background:
The appellant, registered with EOU Development Commissioner, availed credit on capital goods and later opted for debonding of the unit. The adjudicating authority dropped the demand but ordered recovery of interest and imposed a penalty, which was upheld by the Commissioner (Appeals), leading to the present appeal.

2. Appellant's Argument:
The appellant had two units - one EOU and the other DTA. The EOU applied for debonding, paid appropriate duty on capital goods, and transferred them to Unit-II. Unit-II availed credit on 31.3.2001, the date approved by the Development Commissioner for debonding. The appellant argued that interest should not be demanded as the relevant date for the demand should be 31.3.2001, approved by the Development Commissioner.

3. Respondent's Argument:
The Assistant Commissioner contended that final debonding was granted on 14.8.2001, and until then, the unit remained an EOU, justifying the demand for interest. The respondent relied on a specific paragraph of the Original Order-in-Original (OIO) to support this stance.

4. Judgment:
After reviewing submissions and documents, the tribunal found that the appellant had reversed the credit on 30.3.2001, as per the Development Commissioner's approval for debonding w.e.f. 31.3.2001. The tribunal noted that there was no physical removal or clearance of capital goods until the unit became a DTA unit. The adjudicating authority incorrectly took the date of debonding as 14.8.2001 instead of 31.3.2001. Consequently, the tribunal ruled in favor of the appellant, stating that they were not liable for interest or penalty. The impugned order was set aside, and the appeal was allowed.

In conclusion, the tribunal's detailed analysis and interpretation of the dates and approvals related to the debonding process led to a favorable judgment for the appellant, overturning the demand for interest and penalty imposed by the lower authorities.