2017 (2) TMI 150 - AT - Central Excise

Application for stay of recovery - CENVAT credit - vacuum circuit breakers - forged invoices - Held that - the goods in question are highly specialized material, viz., vacuum circuit breakers which are utilised by a limited number of manufacturers of switch gear panels. There is no doubt that the appellant is part of a corporate group who are one of the few manufacturers of switch gear panels and that such switch gear panels are rarely of a standard design that are amenable to multiple uses. There is also no allegation that the vacuum circuit breakers have not been manufactured by the appellant - investigation and the impugned order have not ventured to ascertain if any of the vacuum circuit breakers allegedly diverted could be utilised elsewhere and thus furnish a motive for the alleged misdemeanour. The recovery of duty, interest and penalties in the impugned order stayed.

Summary

Issues:
- Appeal against order-in-original dated 27th November 2009
- Recovery of CENVAT credit under section 11A of Central Excise Act, 1944
- Allegations of transfer of goods without actual transfer
- Specialized nature of goods in question
- Lack of investigation into potential alternative use of diverted goods
- Prima facie balance not entirely in favor of Revenue

Analysis:
The appeal before the Appellate Tribunal CESTAT Chennai was filed by M/s Schneider Electric Infrastructure Ltd against the order-in-original dated 27th November 2009 issued by the Commissioner of Central Excise & Service Tax, LTU, Chennai. The impugned order sought the recovery of an amount of ?17,98,97,603/- as CENVAT credit availed under section 11A of the Central Excise Act, 1944, along with interest and penalties. Additionally, a penalty of ?17,91,519/- was imposed in lieu of breakers seized during the investigation.

Upon hearing both sides, it was noted that the goods in question, namely, 'vacuum circuit breakers,' were transferred from Salt Lake Works to the AEI Works for the manufacture of 'switch gear panels.' The adjudicating authority found discrepancies in the transfer of credit and the actual receipt of goods, leading to the conclusion that the inputs transferred were not the same as those received by the AEI Works.

The impugned order highlighted the specialized nature of the goods involved, emphasizing that 'vacuum circuit breakers' are highly specialized materials utilized by a limited number of switch gear panel manufacturers. Despite being part of a corporate group manufacturing such panels, there was no allegation that the appellant did not manufacture the 'vacuum circuit breakers.'

However, it was observed that the investigation and the impugned order did not explore whether the allegedly diverted 'vacuum circuit breakers' could have been used elsewhere, potentially providing a motive for the alleged misconduct. In light of this, the Tribunal found that the balance was not entirely in favor of the Revenue, especially considering the industrial reputation of the appellant and the minimal jeopardy to revenue in case the final decision favored the appellant.

Consequently, the Tribunal deemed that the application for stay of recovery of duty, interest, and penalties in the impugned order warranted consideration. As a result, the recovery was stayed, and the appeal was scheduled for further proceedings and disposal at a later date.