2017 (3) TMI 855 - AT - Central Excise

Reversal of cenvat credit - Benefit of N/N. 3/2001-CE dated 1.3.2001 and N/N. 6/2002-CE dated 1.3.2002 - CENVAT credit availed on goods exempted by notification - violation of condition of notification - Held that - the exemption is available to the respondent if the vehicles are manufactured out of chassis s falling under chapter heading 87.06 on which the duty of excise has been paid and no the credit of duty paid on other inputs for fabrication of bodies of that chassis has been taken. Admittedly in this case the respondent has taken the credit on inputs, therefore, the respondent is not entitled for exemption. Moreover, the case of the Revenue is that the respondent has availed exemption, in that circumstance, the goods to be treated as exempted goods and the respondent is liable to pay 8% of the value of the exempted goods which means chassis plus body. Admittedly, in this case, the respondent has not paid the amount of 8% of the value of chassis at the time of clearance of motor vehicle, therefore, the respondent has not paid the correct amount under Rule 6 (3) (b) of Cenvat Credit Rules, 2001 - demand of duty alongwith interest upheld. Penalty - Held that - As there is a difference opinion on the issue of imposing penalty on the respondent, therefore the matter be placed before the Hon ble President to appoint third Member. Appeal disposed off - matter on remand.

Summary

Issues:
- Eligibility for exemption under Notification No. 3/2001-CE and Notification No. 6/2002-CE.
- Interpretation of Rule 6 (3) (b) of Cenvat Credit Rules, 2001.
- Imposition of penalty on the respondent.

Eligibility for Exemption:
The case involves the manufacturing of motor vehicle bodies on duty paid chassis. The respondent availed exemption on motor vehicle bodies fabricated for independent chassis owners. However, the appellant argued that the respondent is not entitled to the exemption as they availed credit on other inputs used in fabrication. The Tribunal found that since the respondent had taken credit on inputs, they were not eligible for exemption. The appellant's contention that the respondent should pay 8% of the value of chassis plus bodies was upheld.

Interpretation of Rule 6 (3) (b) of Cenvat Credit Rules, 2001:
The Tribunal examined the conditions under Rule 6 (3) (b) which required the payment of 8% of the total value of exempted goods before clearance. The respondent had paid 8% on the value of bodies only, instead of the total value of the exempted goods (chassis plus body). This non-compliance led to the confirmation of the demand of duty against the respondent. The Tribunal clarified that the respondent's actions did not fulfill the conditions of the rule, making them ineligible for the exemption.

Imposition of Penalty on the Respondent:
There was a difference of opinion regarding the imposition of a penalty on the respondent. One member agreed with the non-imposition of the penalty, while the other member found that the respondent deliberately violated Rule 6 (3) (b) and the conditions of the notifications, showing an intent to evade duty. The member supporting the penalty imposition argued that the respondent's actions were deliberate and not a bonafide mistake, justifying the penalty under Rule 25 of C.E. Rules, 2002. Ultimately, the order of the Commissioner (Appeals) regarding the non-imposition of the penalty was set aside, and the penalty was imposed on the respondent.

This judgment highlights the importance of strict compliance with exemption conditions and rules governing duty payment and credit availing. The Tribunal emphasized the need for clear interpretation and adherence to legal provisions to prevent misuse and ensure fair application of tax laws.