2016 (11) TMI 180 - AT - Central Excise

Availing credit on returned goods - Clandestinely removal - Suppression of facts - Rule 16 of the Central Excise Rules 2002 - Held that - sub-rule (1) of the Rule lays down the requirement of such goods to be recorded entitlement of assessee to input credit on such goods and its utilization as per rules. It does not cover the situation where such goods have been removed - The plea that the demand is barred by limitation cannot be sustained as the assessee did not disclose the clearance of scrapped machines in ER-1 return such clearances were made without cover of invoice as required under law and their records mis-declared the actual facts by suppressing the disappearance of the machines - Decided against the assessee.

Summary

Issues:
- Duty evasion through clandestine clearance of goods for repair without payment of duty
- Applicability of Rule 16(1) and Rule 16(2) of Central Excise Rules, 2002
- Interpretation of Rule 16 and its implications on CENVAT credit
- Suppression of facts leading to penalty imposition
- Invocation of extended period for demand recovery

Analysis:
The case involved M/s Meghdoot Refrigeration Industries Pvt. Ltd. appealing against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mumbai-I. The issue revolved around the clandestine clearance of machines for repair without payment of duty, leading to the recovery of credit taken on these machines along with interest and penalties. The Commissioner (Appeals) upheld most of the order, except for dropping the penalty on the Director of the firm.

The appellants argued that their situation fell under Rule 16(1) of the Central Excise Rules, 2002, as the goods were brought back for repairs and were entered in the Form-V register. They contended that there was no suppression as the register contained entries of goods and there were isolated cases of scrapping, thus denying any mental culpability. On the other hand, the Revenue contended that Rule 16(2) applied, and the goods were liable for payment equal to the CENVAT Credit taken by them.

The Tribunal analyzed Rule 16, highlighting that sub-rule (1) allows for input credit on goods brought back for processes, while sub-rule (2) deals with goods removed without undergoing a manufacturing process. The Tribunal cited previous judgments to support the Revenue's interpretation of Rule 16(2) and the liability to pay the credit amount if goods were not manufactured upon return.

Ultimately, the Tribunal dismissed the appeal, upholding the demand recovery and penalties. It held that the extended period was rightly invoked due to suppression of facts, and the plea of limitation was not sustainable. The decision emphasized that since there was suppression, the benefit of Section 11A(2B) was not available to the assessee, leading to the dismissal of the appeal.

In conclusion, the judgment clarified the application of Rule 16 in cases of goods brought back for repair, emphasized the consequences of suppression of facts, and upheld the recovery of duty and penalties in cases of clandestine clearance.