2010 (1) TMI 351 - AT - Central Excise

Cenvat Credit- Appellant is engaged in the manufacture of motor vehicles and availed cenvat credit on various inputs received by them. Appellant had sent several capital goods to the job workers without reversing the cenvat credit and on the ground that these capital goods sent out by the appellants for job work were the Moulds, Jacks and Fixtures and in respect of which there is no time limit for return and other capital goods have not been received back within 180 days only required to apply the cenvat credit Rule 4(5)(a). Show cause notice was issued and the impugned order has been passed after completion of adjudication process, whereby cenvat credit of Rs. 39,35,599/- has been demanded and interest on the same has also been demanded. The penalty of Rs. five lakhs has also been imposed. Held that- section 11AB of the Act, clearly provides that interest liable from first date of month succeeding the month in which duty ought to have been paid. Duty is liable to be paid only after 180 days over. For the penalty it is held that, this is only a minor procedural omission and had happened because of mistake. Appeal is allowed.

Summary

Issues:
- Availing cenvat credit on inputs sent to job workers without reversing the credit.
- Dispute over the applicability of time limit for returning capital goods under Rule 4(5)(a) of Cenvat Credit Rules.
- Demand of cenvat credit, interest, and penalty.

Analysis:

1. The appellant, engaged in manufacturing motor vehicles, availed cenvat credit on inputs sent to job workers without reversing the credit, specifically on capital goods like Moulds, Jacks, and Fixtures. The dispute arose regarding the time limit for returning these capital goods under Rule 4(5)(a) of Cenvat Credit Rules. A show cause notice was issued, leading to a demand of cenvat credit amounting to Rs. 39,35,599/-, along with interest and a penalty of Rs. five lakhs.

2. The appellant contended that they presumed the tools could be sent under Rule 4(5)(b) of Cenvat Credit Rules without the 180-day limit for return applying. The advocate highlighted that the duty liability and interest were not in dispute, with the duty amount and interest already paid. The dispute centered on the penalty and the duty amount demanded for the initial six months from the clearance date. The appellant argued that interest should only be payable after 180 days, citing Section 11AB. They emphasized that the duty paid was available as credit to the job worker, making it unnecessary to avoid payment. The appellant claimed the mistake was due to a bona fide belief about the rule's applicability. Conversely, the DR argued that interest should be paid from the clearance date and supported the imposition of a penalty for the procedural lapse.

3. The Tribunal considered both arguments and referred to Section 11AB, which dictates the liability for interest. It was determined that duty should only be paid after the 180-day period from the issue of capital goods to the job worker. Regarding the penalty, the Tribunal agreed with the appellant that the procedural omission was minor and occurred due to a mistake. Notably, the Tribunal referenced a previous decision where a penalty on a similar issue was set aside. Consequently, the appeal was allowed, ruling in favor of the appellant.