2017 (3) TMI 363 - AT - Central Excise

Imposition of penalty u/r 15 (2) of CCR, 2004 - removal of inputs as such - failure to reverse the credit - Rule 3(5) of CCR, 2004 - Held that - Though it is alleged by the department that the solvents were removed as such, there is no evidence to show that these solvents were fit for use in the manufacture of final products. It is the case of the appellant that the solvents had deteriorated in quality and were not usable solvents and therefore they had cleared them as spent solvents. That spent solvents do not attract any duty at all - appellants have paid the entire duty along with interest prior to the issuance of SCN. From the facts revealed I am able to conclude that there is no iota of evidence to establish any suppression of facts or willful-misstatement on the part of appellant since the department has no case that the inputs cleared are fit for use by appellant for manufacture of finished goods - penalty imposed is unwarranted - appeal allowed - decided in favor of appellant

Summary

Issues:
Appeal against penalty for removal of inputs without reversing credit.

Analysis:

1. Background: The appellants, manufacturers of Bulk Drugs, availed CENVAT credit on raw materials including solvents. In 2009, they cleared solvents as spent solvent after they became unfit for use in finished goods. A Show Cause Notice alleged that the appellants removed inputs without reversing credit, demanding CENVAT and imposing a penalty.

2. Appellant's Argument: The appellants argued that the solvents were cleared as spent solvents, not as inputs as such, as they were unfit for use in manufacturing finished goods. They paid the differential duty before the Show Cause Notice, equal to the credit availed, and cited relevant case laws to support their position.

3. Respondent's Argument: The respondent contended that the appellants removed solvents as inputs without reversing credit, leading to suppression of facts and willful misstatement, justifying the penalty imposed. They distinguished the case laws cited by the appellant based on the circumstances of input rejection.

4. Judgment: The tribunal analyzed the evidence and found no proof that the solvents were fit for use in final products. The appellants cleared the solvents as spent due to deterioration, paying duty on transaction value. The tribunal noted that the solvents were cleared as spent solvents, not fit for use, and the penalty was unwarranted. The penalty imposed under Rule 15(2) was set aside, as there was no suppression of facts or willful misstatement by the appellants.

5. Conclusion: The tribunal allowed the appeal, setting aside the penalty while upholding the duty demand and interest paid by the appellants. The decision emphasized the lack of evidence supporting the allegation of removing inputs without reversing credit, leading to the penalty being deemed unwarranted.