2017 (2) TMI 259 - AT - Central Excise

Returned goods - re-conditioning of the duty paid motor vehicle in the factory of the appellant - Rule 16(2) of the Central Excise Rules, 2002 - whether the the process on the re-made goods, amounts to manufacture or not? Held that - The process carried out by the appellant does not amount to manufacture as the motor vehicle was completely manufactured and sent for test therefore after return of the said motor vehicle no process which amounts to manufacture was carried out, therefore in terms of Rule 16(2) of Central Excise Rules 2002 the appellant is required to pay the duty on reissue of the motor vehicle equivalent to cenvat credit availed at the time of re-entry of the motor vehicle in their factory. However the duty paid by the appellant is short, accordingly the differential duty demand confirmed and upheld by the lower authority is sustainable. Reduced penalty was upheld on the ground that there is no mala fide intention to evade payment of duty on the part of the appellant. Extended period of limitation - the appellant have been filing the periodical returns which indicates the payment of duty, for this reason also there is no suppression of fact. In this fact the demand prior to 26.7.2003 will not sustain being time bar. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 16 of the Central Excise Rules, 2002 regarding the payment of duty on reconditioning of motor vehicles.
2. Validity of differential duty demand and penalty imposition under Section 11A of the Act.
3. Time bar on part of the demand due to regular filing of returns by the appellant.
4. Justifiability of reduced penalty of ?25,000 upheld by the Tribunal.

Analysis:
1. The case involved the appellant clearing motor vehicles to ARAI for testing, availing cenvat credit upon return, and conducting certain processes before clearing them again. The dispute arose over whether the activities amounted to manufacture under Rule 16 of the Central Excise Rules, 2002. The appellant argued that the duty paid on the transaction value was correct, while the department contended that duty equivalent to the cenvat credit availed should be paid if no manufacturing occurred. The Tribunal found that the process did not amount to manufacture, thus upholding the differential duty demand.

2. The appellant challenged the demand and penalty imposed under Section 11A of the Act. The Tribunal noted that the demand for a specific period was time-barred due to regular return filings by the appellant. The reduced penalty of ?25,000 was justified as there was no mala fide intent to evade duty, supported by the Tribunal's previous order. The Tribunal upheld the penalty amount, as no further appeals were filed against it, thereby partly allowing the appeal.

3. The Tribunal's decision emphasized that the appellant's regular filing of returns indicated no suppression of facts, leading to the demand prior to a certain date being time-barred. The penalty amount was maintained at ?25,000 based on the lack of mala fide intent and the absence of further appeals against the penalty reduction. Consequently, the appeal was partly allowed based on the above considerations.