CX - Once amount payable under CCR is treated as duty of excise, inputs & capital goods removed without payment of duty shall be liable to confiscation u/r 25(1) of CER, 2002: CESTAT
By TIOL News Service
AHMEDABAD, OCT 28, 2016: THE first appellant is a registered unit engaged in manufacturing of Umbrella Frames [Ch 66]; the second appellant is the job work unit of the first appellant manufacturing 'Tube'; and the third appellant is a godown premises belonging to the same partnership firm. All the three are located at separate and different addresses, but at Umbergaon, District Valsad.
During the physical verification of stock at the aforesaid three premises, the department detected that the raw materials, finished goods and capital goods removed by the first appellant were lying at the premises of the second and third appellants.
The first appellant admitted that they had cleared these goods without issuing challans and without payment of duty, and accordingly paid Rs.11,69,500/- from CENVAT credit account and Rs.3,17,748/- through GAR-7challan towards CENVAT credit involved in the said raw materials and capital goods which were removed without reversing credit/ without payment of duty and without issuing central excise invoices.
The department seized the said raw materials and capital goods found in the premises of second and third appellants.
Subsequently, a SCN was issued seeking to confiscate the goods valued at Rs.18,37,642/- seized at the premises of the second appellant and the goods valued at Rs.1,00,04,981/- seized at the premises of the third appellant and to impose penalty on all the three appellants.
The adjudicating authority ordered confiscation of the goods and imposed redemption fine of Rs.2 lakhs in respect of the goods seized at the premises of the second appellant, and Redemption Fine of Rs.15 lakhs in respect of goods seized at the premises of third appellant and imposed penalty of Rs.12 lakhs under Rule 25 of the CER, 2002 on the first appellant.
No penalty was imposed on the other two appellants and partners of the appellant firms, though proposed in show cause notice.
The Commissioner (Appeals)upheld the order of confiscation of the goods seized at the premises of the second and third appellants alongwith imposition of redemption fine but reduced the redemption fine to Rs. 10 lakhs in r/o the goods seized at the premises of the third appellant. Penalty imposed was also upheld but reduced to Rs.7.5 lakhs.
Aggrieved, the appellants are before the CESTAT and pray that the Redemption Fine and penalty imposed, since not legally proper should be set-aside.
The Bench observed –
++ We find that the first appellant had undisputedly availed CENVAT credit of the duty paid on the raw material and capital goods and removed the same from the registered premises without reversing the credit/ without payment of duty and without issuing Central Excise invoices and challans. It is not disputed that the inputs or capital goods on removal, after taking credit, must be removed on payment of an amount equivalent to the credit amount availed in terms of Rule 3(5) of Cenvat Credit Rules.
++ It is also not disputed that the amount payable under Cenvat Credit Rules, 2004 is treated as duty of excise as per Explanation to Rule 8 of Central Excise Rules, 2002, which reads as under:-
"Explanation- For the purposes of this Rule, the expressions 'duty of excise' shall also include the amount payable in terms of the Cenvat Credit Rules, 2004."
++ Once the amount payable under Cenvat Credit Rules is held as duty of excise, the inputs and capital goods removed without payment of amount (equal to credit amount) from the factory of the first appellant shall be treated to have been removed without payment of duty, making the same liable to confiscation under Rule 25(1) of the Central Excise Rules, 2002.
In fine, the impugned Order-in-Appealconfirming the confiscation of the goods and imposition of redemption fine in lieu of confiscation and imposition of penalty on the first appellant was upheld.
However, noting that there is sufficient ground for further reduction of redemption fine on the third appellant and penalty on the first appellant, the same were reduced to Rs.5 lakhs.
The appeals were disposed of.
(See 2016-TIOL-2801-CESTAT-AHM)
