2008 (8) TMI 301 - AT - Central Excise

Goods received for re-conditioning - submission of revenue that there must be evidence that goods received and the goods cleared again after re-conditioning are the same - Rule 16 lays down the procedure to check clandestine removal of goods on the pretext of reconditioning, repairs etc. - if the goods are subjected to the processes which would amount to manufacture, the manufacturer is required to pay duty by reversing the credit taken - the allegations against the respondent are more in the realm of suspicion than proof - demand and penalty unjustified

Summary

Issues:
- Duty demand confirmation under Section 11A of the Central Excise Act, 1944.
- Imposition of penalty under Section 11AC of the Act.
- Alleged failure to observe the procedure under Rule 16 of the Central Excise Rules.
- Requirement of evidence for goods received for reconditioning to be the same as those cleared after processing.

Analysis:
1. The appeal pertained to the confirmation of duty demand of Rs. 2,38,625/- under Section 11A of the Central Excise Act, 1944, with interest and penalty, against an Order-in-Appeal setting aside the Order-in-Original by the Assistant Commissioner. The appellant, a manufacturer of pistons & Gudgeon Fins, was accused of clearing goods without payment of duty using invalid documents, as per the Revenue's claim.

2. The case revolved around the alleged non-compliance with Rule 16 of the Central Excise Rules, where goods cleared for re-making or re-conditioning are required to follow specific procedures, including entry in records and payment of duty if necessary. The Revenue contended that the appellant failed to adhere to these requirements, potentially leading to loss of revenue.

3. During the hearing, the argument focused on the necessity of obtaining permission and informing authorities about goods receipt, as per the trade notice. The appellant's defense highlighted that they did not avail Cenvat credit on defective goods, thus bypassing the need for Rule 16 compliance. The issue of potential clandestine removal was raised by the Revenue.

4. The Tribunal considered the importance of ensuring that goods received for reconditioning were the same as those cleared after processing, emphasizing the need to prevent clandestine removal. The judgment highlighted that penalty imposition for contravention of Rule 16 required evidence of intent to evade duty, which was lacking in the present case, leading to dismissal of the appeal based on previous Tribunal decisions.

5. The judgment underscored the significance of following prescribed procedures to prevent revenue loss and evade duty payment. It emphasized the need for concrete evidence of intent to evade duty before imposing penalties for rule violations. The decision was based on the lack of substantial proof against the appellant and consistency with previous Tribunal rulings on similar cases.