2017 (10) TMI 262 - AT - Central Excise

CENVAT credit - capital goods transferred to other units without reversal of credit under invoices or without following any procedure for removal of the said goods - Held that - The fact of reversal was noticed by the Dept on initiating investigation against the appellant - It is also not in dispute that before shifting the machinery in question to other unit, the appellant had never informed the Dept. - extended period and penalty justified - appeal dismissed - decided against appellant.

Summary

Issues: Appeal against demand for recovery of Cenvat Credit on transferred Capital Goods without reversal of credit and imposition of penalty.

Analysis:
1. Issue of Extended Period of Limitation: The appellant argued that the extended period of limitation cannot be invoked as no facts were suppressed from the department. They contended that the transferred capital goods were shifted to their Registered Unit III, engaged in job work for the main unit. The appellant claimed that Unit III is an integral part of the main unit, and upon return of the capital goods to Unit I in the future, they would be entitled to avail credit. The appellant asserted that penalty imposition was unwarranted in this scenario.

2. Suppression of Fact and Justification for Penalty: The Revenue argued that the appellant was aware of the requirement to reverse Cenvat Credit on capital goods when transferred between registered units, as they had followed the procedure in some cases. The Revenue contended that transferring capital goods without reversing credit and without informing the department constituted suppression of fact. Therefore, the Revenue justified invoking a larger period of limitation to confirm the demand and impose a penalty.

3. Decision and Rationale: The Tribunal observed that the appellant had subsequently reversed the entire credit availed along with interest. It was undisputed that the main unit had availed credit on the capital goods and transferred some without reversing credit to Unit III. The department discovered this during an investigation, and the appellant had not informed the department before shifting the machinery. Considering these circumstances, the Tribunal upheld the larger period of limitation and the imposition of penalty, ultimately rejecting the appeal.

In conclusion, the Tribunal affirmed the demand for recovery of Cenvat Credit on transferred Capital Goods without reversal of credit and justified the penalty imposed based on the suppression of facts. The decision highlighted the importance of following procedures and informing the department when transferring capital goods between registered units to avoid penalties and extended limitations.