2009 (1) TMI 165 - AT - Central Excise

Irregular use of Cenvat credit - Appellant removed imported capital goods as such and paid excise duty on the capital goods using Cenvat credit - lower authorities found that excise duty was paid using credit wrongly to transfer the same to its sister unit - appellants submitted that the demand was time-barred - as the monthly return had been filed for clearances of excisable goods and use of Cenvat credit for the month April 2003 in time, the appellants had kept the department informed of the impugned clearance - contention accepted - demand raised in 2005 is held as time barred

Summary

Issues:
1. Wrong utilization of Cenvat credit for payment of excise duty on imported capital goods.
2. Time-barred demand for irregularly availed Cenvat credit.
3. Validity of demand for interest and penalty.

Analysis:
1. The appellant removed imported capital goods paying excise duty using Cenvat credit, which had not suffered CVD at the time of import. The lower authorities found this utilization of credit to be irregular as the goods were transferred to a sister unit. The demand for the credit availed and penalty imposed were challenged on the ground of being time-barred. The appellant argued that the demand was beyond the normal period, as the monthly return had been filed on time, informing the department of the clearance of capital goods and Cenvat credit utilization. The Tribunal noted that Rule 3(4) of Cenvat Credit Rules required reversal of credit on removal of capital goods, but in this case, no credit had been availed at the time of receipt, making the demand for reversal invalid. As the appellant had informed the duty payment details in the monthly return, the larger period for demand invocation was not justified. Consequently, the demand for credit availed, interest, and penalty were held to be time-barred and unsustainable.

2. The Respondent argued that the capital goods were imported under the EPCG scheme and cleared without payment of duty after fulfilling export obligations. However, the credit was wrongly utilized for clearance. The Tribunal found that the demand for irregularly availed Cenvat credit and interest was made in accordance with the law. Nevertheless, since the demand was beyond the normal period and the appellant had duly informed the duty payment details in the monthly returns, the larger period for demand was not valid. Thus, the demand for irregularly availed credit and interest was also considered time-barred and unsustainable.

3. In conclusion, the Tribunal held that the demand for irregularly availed Cenvat credit, interest, and penalty was time-barred due to the appellant's timely filing of monthly returns and informing the department of duty payments. The impugned order was deemed unsustainable, and the appeal was allowed, vacating the demand for credit availed, interest, and penalty. The judgment was pronounced on 16-1-2009 by Shri P. Karthikeyan, Member (T) of the Appellate Tribunal CESTAT, Chennai.