2016 (5) TMI 897 - AT - Central Excise

Imposition of penalty - Cenvat credit wrongly taken - M.S. Angle, M.S. Channel, G.C. Sheet and Welding Electrodes are used for making support structures for the capital goods - Held that - there were conflicting judgments regarding admissibility of Cenvat Credit on such items before Larger Bench delivered judgments in the case of Vandana Global Ltd. Vs. CCEx., Raipur 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) . When conflicting judgments with respect to an issue were available then it cannot be said that appellant had malafide intention to fraudulently take inadmissible credit. Accordingly, penalty imposed by the adjudicating authority, and upheld by the first appellate authority, is set aside. Classification - Copper Bonded Grounding Rods - Held that - product manufactured by the appellant has undergone specific processes to make the same usable solely and principally for lightning arrester system. Reliance placed by the appellant on the drawback schedule published by the Department and export made by other appellants is not of any help because it is not coming out of the list of other exporters whether any specific processes were also undertaken by those exporters on the Copper Bonded Grounding Rods exported. Accordingly, it is held that classification of the goods manufactured by the appellant will be CETH 8538.00 as parts of lightning arrester. Period of limitation - Demand and imposition of penalty - appellant has exported the entire quantity of Copper Bonded Grounding Rods manufactured and would have been entitled to 100% rebate of duty paid on the finished goods - Held that - there was no reason for the appellant to deliberately mis-declare the classification under CETH 7215.00. Thus, it cannot be said that appellant had any intention to evade payment of Central Excise duty. Demand is, therefore, required to be restricted within the period of one year from the date of issue of show cause notice and penalty imposed upon the appellant under Section 11AC is required to be set aside. - Decided partly in favour of appellant

Summary

Issues involved:
1. Imposition of penalty on CENVAT Credit taken by the appellant.
2. Correct classification of "Copper Bonded Grounding Rods" manufactured by the appellant and the time bar nature of the demand.

Analysis:

Issue 1: Imposition of penalty on CENVAT Credit
The appellant contested the denial of CENVAT Credit amounting to ?1,23,905, arguing that the items in question were used for making support structures for capital goods. The appellant relied on the decision in the case of Vandana Global Ltd. Vs. CCEx., Raipur to support their claim that there was no malafide intention in taking the credit. The Tribunal observed that conflicting judgments existed on the admissibility of such credit before the Larger Bench delivered a conclusive judgment. As a result, the penalty imposed by the adjudicating authority was set aside, as it could not be deemed that the appellant had fraudulent intentions.

Issue 2: Correct classification of "Copper Bonded Grounding Rods"
Regarding the classification of the "Copper Bonded Grounding Rods" exported by the appellant, the Revenue argued that they should be classified under Central Excise Tariff Heading 8538.00 as part of lightning arresters. The appellant, on the other hand, claimed that the product fell under Section Sub-Heading 7215.40, citing the drawback schedule and classification by other exporters as evidence. The Tribunal noted that the appellant had undertaken specific processes on the rods, as confirmed by statements from the Director of the appellant. These processes rendered the rods specifically usable for lightning arrester systems. Thus, the classification under CETH 8538.00 was deemed appropriate, leading to the rejection of the appellant's appeal in this regard.

In conclusion, the Tribunal allowed the appeal filed by the appellant only concerning the penalty on CENVAT Credit and the time-barred nature of the demand, setting aside the penalty imposed under Section 11AC.