2015 (10) TMI 1676 - AT - Central Excise

CENVAT Credit - Penalty u/s 11AC - Factory - department contends that only the bakery/pastry division wherein the excisable goods are getting manufactured shall be regarded as factory of production as per definition of factory provided under section 2(e) of the Act and the other premises are not connected to the manufacture of excisable goods and hence, cannot be considered as factory - Held that - Penalty under Section 11AC of the Central Excise Act, 1944 is imposable when there is any fraud, collusions, suppression or mis-declaration of facts on part of the appellant with intent to evade payment of duty. In the present case, I find that there is no suppression or mis-declaration of facts on part of the appellant with intent to evade payment of duty or to avail ineligible CENVAT Credit. Hence, I set aside the penalty imposed under Section 11AC of the Central Excise Act, 1944 read with Rule 15(2) of Cenvat Credit Rules, 2004 read with Rule 25 of Central Excise Rules, 2002 on the appellant. Since the appellant has reversed the credit wrongly availed on pointing out by the department, I direct the appellant to pay the interest till the date of duty was deposited or CENVAT Credit reversed. - Decided partly in favour of assessee.

Issues involved:
1. Availment of CENVAT Credit on furnace oil for steam generation.
2. Interpretation of the definition of 'factory' under Section 2(e) of the Act.
3. Time limitation for issuance of show-cause notice.
4. Applicability of penalty under Section 11AC of the Central Excise Act.

Availment of CENVAT Credit on furnace oil for steam generation:
The appellant, a manufacturing unit, availed CENVAT Credit on furnace oil used for generating steam, with only a portion of the steam being utilized directly in the production of excisable goods. The dispute arose when the department contended that only the division directly involved in manufacturing excisable goods could be considered a factory, and hence, CENVAT Credit for steam used in non-production activities was disallowed. The appellant argued that the entire hotel premises should be considered a factory as per the definition under Section 2(e) of the Act, as the steam generation was integral to the manufacturing process. The tribunal examined previous judicial decisions and ruled in favor of the appellant, allowing the appeal partly.

Interpretation of the definition of 'factory' under Section 2(e) of the Act:
The crux of the issue lay in determining whether the entire hotel premises could be classified as a factory under the statutory definition. The appellant contended that since steam generated from furnace oil was essential for baking excisable goods within the hotel, the entire premises should be deemed a factory. The tribunal analyzed the definition under Section 2(e) of the Act and considered the appellant's argument, ultimately setting aside the penalty imposed under Section 11AC of the Central Excise Act.

Time limitation for issuance of show-cause notice:
The appellant raised a procedural defense, arguing that the show-cause notice issued for disallowing CENVAT Credit was time-barred under Section 11A(1) of the Act. They claimed that there was no intentional misrepresentation or suppression of facts regarding the factory premises. The tribunal, however, did not delve deeply into this issue as the primary focus was on the interpretation of the factory premises and the availment of CENVAT Credit.

Applicability of penalty under Section 11AC of the Central Excise Act:
The tribunal analyzed the imposition of penalties under Section 11AC of the Central Excise Act, emphasizing that penalties are warranted in cases involving fraud, collusion, suppression, or misdeclaration of facts to evade duty payment. In this case, the tribunal found no evidence of such actions by the appellant, leading to the setting aside of the penalty. Instead, the tribunal directed the appellant to pay interest on the wrongly availed credit until the date of duty payment or credit reversal.

In conclusion, the tribunal partially allowed the appeal, emphasizing the importance of correctly interpreting statutory definitions and ensuring compliance with CENVAT Credit rules while considering the manufacturing processes within a designated factory premises.

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