2017 (11) TMI 766 - AT - Central Excise

CENVAT credit - capital goods which were later removed to their another unit engaged in their job work, without following any procedure laid down under CCR, 2004 - Held that - The CENVAT Credit Rules, 2004 specifically provides for such eventualities/situation whereunder inputs/ capital goods can be removed from the factory for job work and in the event, the inputs/capital goods are not returned within the period of 180 days, the assessee is required to reverse the cenvat credit - In the present case, even though, the capital goods on which credit had been availed were removed by the appellant, the same were not received in their factory premises even after lapse of 180 days from the initial date of removal. In these circumstances, the appellant is required to reverse the credit on the said capital goods. The Appellant had immediately after installing the capital goods, removed the same year under Chits and without following any procedure, whereas for clearance of inputs for job-work they prepared annexure-II challans and followed the laid down procedure. Therefore, imposition of penalty is justified. Considering the facts and circumstances, I do not find any reason to impose penalty on Shri Manoj Joshi under Rule 15 of the CCR. Accordingly, the appeal filed by the Sh. Manoj Joshi is allowed. Appeal allowed in part.

Summary

Issues:
1. Availing of cenvat credit on capital goods and subsequent removal to another unit without following prescribed procedures.
2. Allegation of violation of Cenvat Credit Rules, 2004 leading to demand notice, interest, and penalty.
3. Interpretation of Rule 4(5)(a) of Cenvat Credit Rules, 2004 regarding the return of capital goods within 180 days.
4. Applicability of previous judgments in similar cases to the present situation.
5. Imposition of penalty on the appellant and director under Rule 15 of Cenvat Credit Rules, 2004.

The judgment involves appeals against an order passed by the Commissioner (Appeals) Vapi concerning the availing of cenvat credit on capital goods and their subsequent removal to an unregistered unit without following prescribed procedures. The appellant argued that since the goods were used for job work exclusively, recovery of cenvat credit was incorrect, citing precedents. The Revenue contended that the appellant contravened Cenvat Credit Rules and did not follow the required procedures for removal and return of capital goods within 180 days. The Tribunal noted that the appellant failed to follow the rules despite the goods being moved to another unit engaged in job work. The Tribunal referenced Rule 4(5)(a) of Cenvat Credit Rules, emphasizing the need to reverse credit if goods are not returned within the stipulated period. Previous judgments cited were deemed inapplicable to the present case due to differing rules. The Tribunal upheld the demand for credit reversal and penalty imposition due to non-compliance, while exempting the director from penalty. Thus, the appeal was rejected for the appellant but allowed for the director.

In conclusion, the judgment highlights the importance of adhering to Cenvat Credit Rules, particularly regarding the proper procedure for availing and returning cenvat credit on capital goods. It underscores the significance of following the prescribed timelines and rules outlined in the legislation to avoid penalties and demand notices. The Tribunal's decision was based on a strict interpretation of the rules and a clear distinction between previous judgments and the specific circumstances of the case at hand. Compliance with regulatory frameworks is crucial in matters concerning tax credits and procedural requirements to ensure legal validity and avoid financial liabilities.