2018 (5) TMI 537 - AT - Central Excise

Penalty u/s 11 AC of the Central Excise Act, 1944 - extended period of limitation - It is the case of the Revenue that appellant assessee could not availed CENVAT credit of MS Drums as the process of repacking does not amount to manufacture - Held that - repacking from bulk packs to smaller packs would amount to manufacture and appellant cannot be faulted with the bonafide impression that they may have to discharge Central Excise duty on the repacked Styrene Monomer and accordingly availed the CENVAT credit on the MS Drums. It is undisputed that the appellant assessee had discharged the duty liability on Styrene Monomer cleared in MS Drums as a manufactured product. If the appellant discharged the Central Excise duty, he is eligible to avail the CENVAT credit which has been procured and having discharged the duty liability on the finished goods, they had in affect reversed the CENVAT credit availed by them on MS Drums. Penalty cannot be levied - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Challenge to penalty imposition under Section 11 AC of the Central Excise Act, 1944.
2. Dispute over availing CENVAT credit on MS Drums for repacking Styrene Monomer.
3. Appeal against the Order-in-Appeal No. 100/2009 (V-I) CE dated 31.07.2009.

Analysis:
1. The appellant assessee contested the penalty imposition under Section 11 AC of the Central Excise Act, 1944, while the Revenue challenged the Order-in-Appeal due to the setting aside of the extended period demand by the First Appellate Authority. The appellant had availed CENVAT credit on MS Drums for repacking Styrene Monomer, which led to a disagreement with the Revenue regarding the eligibility of availing such credit. The Adjudicating Authority confirmed demands for a specific period along with penalties, which were later partially set aside by the First Appellate Authority, leading to appeals from both parties.

2. The appellant argued that repacking from bulk packs to smaller packs should be considered as manufacturing, justifying the availing of CENVAT credit on MS Drums. The appellant had discharged the duty liability on the repacked Styrene Monomer and filed necessary declarations with the authorities. The Tribunal noted that the appellant acted in good faith based on the belief that repacking constituted manufacturing, citing relevant legal provisions. The Tribunal upheld the appellant's argument, setting aside the penalty imposed and emphasizing that the duty liability was duly discharged, resulting in the reversal of the CENVAT credit on MS Drums, as established in a precedent case.

3. The Tribunal rejected the Revenue's appeal, stating that the denial of CENVAT credit on MS Drums was incorrect. Following the precedent set by the Hon'ble High Court of Gujarat, the Tribunal found no merit in the Revenue's appeal against the dropping of demands beyond the limitation period. The impugned order was deemed correct, and the Revenue's appeal was dismissed. In conclusion, the appellant's appeal was partly allowed, while the Revenue's appeal was rejected, with the operative part of the order pronounced in open court at the conclusion of the hearing.