By TIOL News Service

MUMBAI, AUG 26, 2013: THE appellants had availed credit in respect of capital goods and cleared the same after use on 05.09.2009/16.02.2010 on payment of duty as per Notification no. 39/2007-CE(NT) dated 13.11.2007 by calculating the duty on quarter and part thereof from the date of receipt of the capital goods in the factory.

The officers of the Revenue pointed out that the appellants had short paid the duty on the capital goods. On pointing out the same, the appellants immediately paid the duty along with interest on 09.03.2010.

Two years hence, the appellants received a SCN for appropriation of the duty amount already paid and for imposition of penalty under section 11AC of the Central Excise Act.

‘Needful' was done by the adjudicating authority and the Commissioner(A) too did not find anything amiss in the penalty imposed u/s 11AC of the CEA, 1944.

So, the appellant is before the CESTAT and submits -

+ The issue is in respect of interpretation of the provisions of Notification 39/2007-CE(NT). Inasmuch as whereas the appellants calculated and paid the duty by taking into consideration the quarter in which the capital goods were received and cleared from the factory the Revenue is calculating duty on the basis of the days from the day the capital goods were received in the factory.

+ As there is no intention on the part of the appellants to evade payment of duty imposition of mandatory penalty is unwarranted.

The Revenue representative submitted that the Revenue is right.

The Bench observed -

"6. I find that the provisions of Notification no. 39/2007-CE(NT) provide that if the capital goods on which credit has been taken are removed after being used, the manufacturer shall pay an amount equal to CENVAT credit taken on the capital goods reduced by 2.5% on each quarter of the year or part thereof from the date of taking of the CENVAT credit. The appellants while clearing the capital goods calculated duty on quarterly basis whereas the Revenue wants to calculate on actual number of days. In these circumstances, I find merit in the contention of the appellants that it is not a case of intention to evade payment of duty, therefore, the penalty imposed under section 11AC of the Central Excise Act is set aside and the appeal is allowed."

In passing: Notfn 39/2007-CE(NT) -

In the CENVAT Credit Rules, 2004, in rule 3, in sub-rule (5), after the second proviso, the following proviso shall be inserted, namely:-

"Provided also that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the CENVAT Credit ;".

(See 2013-TIOL-1269-CESTAT-MUM)