2017 (6) TMI 422 - AT - Central Excise

Benefit of N/N. 3/2001-CE dated 1.3.2001 and N/N. 6/2002-CE dated 1.3.2002 - manufacture of motor vehicle bodies for chassis - denial of exemption on the ground that respondent has availed the credit on other inputs - Held that - the exemption is available to the respondent if the vehicles are manufactured out of chassiss 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 other inputs, therefore, the respondent is not entitled for exemption. 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 CCR, 2001 - demand of duty alongwith interest upheld. Penalty - 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 to resolve - Whether in the facts and circumstances of the case, the penalty on the respondent can be imposed or not ?

Summary

Issues:
Interpretation of exemption notification and Rule 6 (3) (b) of Cenvat Credit Rules, 2001/2002; Imposition of penalty on the respondent.

Analysis:
1. Interpretation of Exemption Notification and Rule 6 (3) (b) of Cenvat Credit Rules, 2001/2002:
The case involved the interpretation of exemption notifications and Rule 6 (3) (b) of Cenvat Credit Rules, 2001/2002. The respondent, engaged in manufacturing motor vehicle bodies, availed exemption on vehicles fabricated for independent chassis owners. However, the respondent took cenvat credit on other inputs used in manufacturing these vehicles, rendering them ineligible for exemption. The issue revolved around whether the respondent fulfilled the conditions for exemption, specifically regarding the availing of duty credit on chassis and other inputs. The tribunal found that since the respondent availed credit on other inputs, they were not entitled to exemption. Additionally, the respondent failed to pay the required 8% value of chassis at the time of clearance, thus not complying with Rule 6 (3) (b) of Cenvat Credit Rules, 2001. Consequently, the tribunal confirmed the duty demand against the respondent along with interest.

2. Imposition of Penalty on the Respondent:
The disagreement arose regarding the imposition of a penalty on the respondent. One member of the tribunal held that the respondent's actions demonstrated a deliberate misstatement to obtain illegal benefits, justifying the penalty under Rule 25 of Central Excise Rules, 2002. The member emphasized that the respondent failed to reverse 8% of the total value of exempted goods as required by Rule 6 (3) (b) of Cenvat Credit Rules, 2001/2002, indicating an intent to evade duty. However, another member disagreed, stating that the respondent had paid 8% on the price charged to customers, not the total value of exempted goods, and thus, the penalty was not justified. Ultimately, the majority decision confirmed the demand against the respondent but set aside the penalty.

In summary, the judgment addressed the interpretation of exemption notifications and Cenvat Credit Rules, ruling against the respondent for failing to meet exemption conditions and comply with duty payment requirements. The penalty imposition on the respondent was a point of contention, with one member supporting it based on deliberate actions, while another member disagreed, leading to the penalty being set aside in the final decision.