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2008 (8) TMI 159 - HC - Central Excise


Issues:
1. Applicability of rule 3(4) of Cenvat Credit Rules, 2002 on capital goods removed after use.
2. Perversity of the impugned order passed by the Tribunal against the basic scheme of Cenvat.
3. Liability of the appellant for penalty in the absence of mens rea.

Analysis:
Issue 1: The appellant, engaged in manufacturing non-alloy steel ingots, availed Modvat credit on an induction furnace purchased in 1994. The furnace was used till 2003 and then sold as scrap, leading to a demand notice for unpaid duty. The adjudicating authority upheld the demand, but the Commissioner (Appeals) ruled in favor of the assessee. The revenue appealed to the Tribunal, citing rule 3(4) of the Cenvat Credit Rules. The Tribunal, in the absence of the appellant's representation, accepted the revenue's appeal. The appellant argued that as per rule 3(4), no duty was payable since the capital goods were not removed from the factory as such. Citing precedents, the appellant contended that the Tribunal should have referred the matter to a Larger Bench if taking a different view. The Court set aside the Tribunal's order, remitting the matter back for fresh consideration.

Issue 2: The appellant challenged the perversity of the Tribunal's order, arguing that the demand was untenable under rule 3(4) of the Rules. The appellant highlighted favorable decisions in similar cases by different Tribunal Benches. The revenue acknowledged the precedents but emphasized the lack of appellant's representation before the Tribunal. The Court noted the inconsistency in the Tribunal's decisions and remanded the case for a fresh hearing to ensure justice.

Issue 3: The question of the appellant's liability for penalty without mens rea was raised. The appellant's counsel contended that the Tribunal's decision was based on the absence of representation, while the revenue stressed the lack of appellant's assistance during the proceedings. Considering the legal issue and the absence of appellant's counsel, the Court directed the Tribunal to rehear the appeal after notifying both parties, thereby disposing of the appeal accordingly.

 

 

 

 

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