2019 (5) TMI 1401 - AT - Central Excise

CENVAT Credit - input services or not? - repair activity on the imported machine - HELD THAT - It is fact that appellant imported machine brought in the factory dismantled and reassembled the same. This does not amount to manufacture and the appellant has never given details of their activity and the process carried out by them. Dismantling of the machine and reassemble of machine does not amount to manufacture. In terms of Rule 16 the Cenvat credit is admissible on any goods brought in the factory for any reason including various processes subject to condition that if the activity does not amount to manufacture the appellant is required to pay duty equal to the Cenvat credit availed at the time of receipt - Only in case of manufacture the assessee is required to pay duty on the assessable value. In the present case the activity does not amount to manufacture the appellant is required to pay duty equivalent to the Cenvat credit availed. However the appellant have discharged duty on transaction value therefore the appellant is liable for payment of duty for the differential amount - The impugned order demanding entire Cenvat credit is not correct and legal - The demand of Cenvat credit should have been confined only for the differential amount. Penalty under Rule 15 of Cenvat Credit Rules read with Section 11AC of Central Excise Act 1944 - HELD THAT - Since the demand is reduced to differential amount between the demand raised by the lower authority and the amount already paid by the appellant at the time of removal of the goods the penalty under Section 11AC shall also stand reduced equal to the differential duty demand and not equal to the total demand confirmed - Since the duty demand is re-determined therefore the appellant is also entitled for option to pay 25% of the penalty subject to condition if the differential duty interest and 25% penalty is paid within one month from the date of this order. Appeal allowed in part.

Summary

Issues:
1. Entitlement to Cenvat credit on imported machine after repair activity.
2. Determination of duty payment on transaction value.
3. Time-barred demand.
4. Penalty imposition under Rule 15 of Cenvat Credit Rules.

Entitlement to Cenvat Credit:
The appellant imported a textile machine, dismantled, reassembled, and sold it, claiming Cenvat credit. The department denied the credit, arguing that repair activity disqualifies credit eligibility. The appellant contended that their activity amounts to manufacture, justifying credit under Rule 16 of Central Excise Rules, 2002. The tribunal held that the activity did not constitute manufacture, requiring duty payment equivalent to the availed credit. As duty was paid on transaction value, the appellant was liable for the differential amount only.

Duty Payment on Transaction Value:
The tribunal emphasized that Rule 16 allows Cenvat credit on goods brought into the factory for any reason, subject to duty payment if the activity does not amount to manufacture. In this case, the appellant's activity of dismantling and reassembling did not qualify as manufacture. Consequently, the appellant was directed to pay duty for the differential amount, as they had already discharged duty based on transaction value.

Time-Barred Demand:
The appellant argued that the demand was time-barred since all relevant information was submitted to the department through monthly returns. However, the tribunal did not address this argument in the judgment, focusing solely on the substantive issues related to Cenvat credit and duty payment.

Penalty Imposition under Rule 15:
The lower authority imposed a penalty under Rule 15 of Cenvat Credit Rules alongside the duty demand. Following the reduction of the demand to the differential amount, the penalty was also reduced accordingly. The appellant was granted the option to pay 25% of the penalty if the stipulated conditions were met within one month from the date of the order. Consequently, the penalty amount was adjusted in line with the revised duty demand, leading to a partial allowance of the appeal.

In conclusion, the tribunal's judgment clarified the entitlement to Cenvat credit, duty payment obligations, penalty imposition under Rule 15, and the subsequent modifications based on the findings.