2019 (5) TMI 461 - AT - Central Excise

Non- reversal of CENVAT credit taken previously on capital goods - packing and levelling Machines - introduction of compounded levy scheme w.e.f. 27-02-2010 - Rule 5(3A) of the CCR, 2004 - suppression of facts or not - HELD THAT - A bare perusal of Rule 16, sub Rule 1 7 would make it clear that no CENVAT credit on capital goods can be availed after 8th March, 2010 and no other provision of CENVAT Credit Rule 2004 shall apply in relation to notified goods. If CENVAT credit is not permitted to be availed on capital goods after notified dates and CENVAT credit Rule 2004 will not be applicable in relation to notified goods, which in the present case means manufacturing tobacco, it cannot be said that without an express provision, whatever credit was availed for old and unused machines are to be refunded by applying provision of CENVAT credit rules 2004. Audit - suppression of facts or not - HELD THAT - EA 2000 audit was therefore held to be participative audit. Likewise CERA audit is conducted by the Comptroller and Auditor General of India in respect of receipt and expenditure of the Government of India. It also discharges revenue audit which covers central excise, service tax and customs laws during which time the assesses were examined by CERA audit party to point out the deficiencies, leakage of revenue and non recoveries of dues by the Central Excise Department - It cannot be said that only because audit party had found some credit availed as inadmissible, suppression of fact is made out. Further it is not established that appellant had any malafide intention to suppress its duty liability from the department. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty demand for non-reversal of CENVAT credit on capital goods under compounded levy scheme.
2. Applicability of CENVAT credit rules to units under compounded levy scheme.
3. Challenge to penalty imposition for non-reversal of CENVAT credit.
4. Interpretation of rules regarding CENVAT credit on capital goods.
5. Justification for non-invocation of extended period for penalty.
6. Statutory audit procedures and its relevance in the case.

Analysis:
1. The case involved a duty demand of &8377; 4,65,476 for not reversing CENVAT credit on 18 packing and levelling Machines after the introduction of a compounded levy scheme. The Appellant had availed CENVAT credit before the scheme's implementation, leading to the demand for duty, interest, and penalty.

2. The Appellant argued that the CENVAT credit rules were not applicable to units under the compounded levy scheme, emphasizing the wide scope of "in relation to notified goods." The argument was supported by Rule 16(1) and Sub Rule - 7, which restricted CENVAT credit on specific goods, excluding capital goods.

3. The Appellant contested the penalty imposition, claiming no fraud or intentional misstatement, as the removal of machines was voluntarily reported to the department. Legal precedents were cited to support the argument against invoking the extended period for penalty imposition.

4. The Tribunal analyzed Rule 16 and concluded that CENVAT credit on capital goods was not permissible after a certain date, and the CENVAT credit rules did not apply to notified goods, such as manufacturing tobacco. The Tribunal rejected the argument that notified goods excluded manufacturing machines, emphasizing the legislative intent behind the rules.

5. Regarding the penalty, the Tribunal considered the statutory audit procedures, highlighting that the audit aimed to ensure tax compliance and discuss issues with the assessee. The Tribunal found no evidence of malafide intent or suppression of duty liability by the Appellant.

6. Ultimately, the Tribunal allowed the appeal, setting aside the Commissioner of Appeal's order and emphasizing the Appellant's compliance with duty payment upon audit objection. The judgment was pronounced in open court on 11/04/2019.