2017 (10) TMI 954 - AT - Central Excise

CENVAT credit - inputs used in the repair of transformers - repaired transformers are cleared without payment of duty - Held that - there is no dispute that the appellant is required to reverse the cenvat credit in respect of the input used in repairing of old transformers. Extended period of limitation - Held that - the suppression of fact is established - extended period invoked. Penalty u/s 11AC - Held that - The penalty u/s 11AC cannot be waived, however it is observed that the adjudicating authority has not extended the benefit of 25% as per the first proviso to Section 11AC - As per the Board Circular No.208/07/2008-CX-6 dt. 22.5.2008, the adjudicating authority must give the option of 25% penalty in the adjudication order - Since the adjudicating authority has not granted the benefit of first proviso to Section 11AC of the Act, the appellant deserve the relief under that proviso, accordingly invoking the proviso of Section 11AC of the Act, the penalty reduced to 25% of ₹ 2,36,148/-. Appeal allowed in part.

Summary

Issues:
1. Demand of cenvat credit, penalty, and interest on inputs used in repairing transformers.
2. Waiver of penalty under Section 11AC of Cenvat Credit Rules 2004.
3. Application of the first proviso to Section 11AC for reducing penalty.

Analysis:
1. The appellant, engaged in transformer manufacturing, received old transformers for repair using inputs with cenvat credit. Although the repaired transformers were cleared without duty payment, the appellant did not reverse the cenvat credit on the repair inputs. The revenue demanded cenvat credit, penalty, and interest initially at ?78,26,657, later reduced to ?2,36,148 due to exportation of repaired transformers.

2. The appellant did not contest the duty demand and interest but sought waiver of the penalty under Section 11AC. The appellant argued that confusion led to not reversing the credit on repair inputs, as they previously discharged excise duty on repaired transformers but changed the procedure. The appellant claimed no mala fide intention due to the ambiguity in clearing repaired transformers with or without duty payment.

3. The Revenue upheld the penalty, and the appellate authority considered the extended period from 2006-07 to 2008-09 for invoking Section 11AC. The authority found suppression of facts, citing the Union of India Vs. Dharmendra Textile Processors judgment. While the penalty could not be waived, the authority noted the absence of granting the 25% benefit as per the first proviso to Section 11AC. Referring to Board Circular No.208/07/2008-CX-6 and the Commissioner of C. Ex. & Customs Vs. R.A. Shaikh Paper Mills P. Ltd. case, the authority reduced the penalty to 25% of ?2,36,148, invoking the proviso of Section 11AC and partially allowing the appeal.