2010 (4) TMI 489 - AT - Central Excise

Interest - Penalty - Assessee submits that they are not liable for interest as the entire quantity of goods was received back within 180 days the period stipulated in relevant rule. Held that - assessee not liable to interest. inputs removed for storage to sister unit without prior permission from excise authorities. Held that - Assessee s contention that such removal did not require prior permission as removal to be treated under Rule 4(5) of Cenvat Credit Rules 2004 which does not require prior permission as removal to be treated under Rule 4(5) of Cenvat Rules 2004 which does not require prior permission not correct. However penalty reduced to Rs. 5000.

Summary

Issues:
1. Demand of Rs. 1,00,81,579/- dropped by Commissioner.
2. Liability for interest on CENVAT credit availed by the assessee.
3. Imposition of penalty under Rule 15(1) of the Cenvat Credit Rules, 2004.
4. Interpretation of Rule 8 of the CENVAT Rules 2004 regarding prior permission for removal of goods for storage.

Analysis:

1. The Commissioner dropped the demand of Rs. 1,00,81,579/- against the assessee, as goods sent for storage from one unit to another were returned within 180 days. However, interest on CENVAT credit and penalty were confirmed. The appeal was admitted due to a legal question, and with consent from both sides, the appeal was heard and decided at this stage.

2. The Tribunal found merit in the assessees' submission that they are not liable for interest as the inputs were returned within the stipulated period. However, the Tribunal did not accept the contention that prior permission was not required for removal for storage to a sister unit. The Tribunal held that penal action was warranted, but reduced the penalty to Rs. 5,000 considering the facts and circumstances of the case.

3. The imposition of penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 was upheld, but the penalty amount was reduced to Rs. 5,000 from the original amount. The Tribunal considered the specific circumstances of the case in determining the reduced penalty amount.

4. The interpretation of Rule 8 of the CENVAT Rules 2004 was crucial in determining whether prior permission was required for the movement of goods to a sister unit for storage. The Tribunal held that the movement for storage to a sister unit should be treated as a removal requiring prior permission, as Rule 8 specifically covers the removal of goods for storage purposes.

In conclusion, the appeal was partly allowed, with the demand dropped by the Commissioner, but liability for interest and penalty under CENVAT Credit Rules, 2004 was upheld, albeit with a reduced penalty amount. The interpretation of Rule 8 regarding prior permission for removal of goods for storage was a key factor in the Tribunal's decision.