KLRF TEXTILES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) Appeal No. E/1203/2004 by the assesses and Appeal No. E/1314/2004 by the Revenue are against an order of the Commissioner (Appeals). The Revenue's appeal, not figuring in today's list, is being taken up for disposal along with the assessee's appeal.

(2.) The assessee has two manufacturing units, one at Gangaikondan and the other at Sattur, which will be conveniently referred to as 'G' unit and 'S' unit, respectively. The 'G' unit transferred certain capital goods as such to the 'S' unit in February 2003. This transfer was not accompanied by payment of duty in any manner. Sub -rule (3) of Rule 3 of the Cenvat Credit Rules, 2002 enabled the assessee to utilize Cenvat credit for payment of duty on capital goods so transferred. This facility, however, was not made use of by the assessee at the time of clearance of the machinery. Officers of Central Excise who visited the 'G' unit on 5 -3 -2003 detected this omission. The next day, the party paid duty on the above capital goods and also paid interest for the period of delay. Later on, the department issued show cause notice, dated 3 -12 -2003, for imposing penalty on the assessee under Section 11AC of the Central Excise Act. This proposal was contested. The original authority imposed a penalty of Rs. 2,32,356/ - [equal to the amount of Cenvat credit] on the assessee under Section 11 AC. The assessee preferred appeal to the Commissioner (Appeals) who reduced the penalty to Rs. One lakh. Still aggrieved, the assessee has filed Appeal No. E/1203/2004. The Revenue is aggrieved by the reduction of penalty and hence Appeal No. E/1314/2004.

(3.) After examining the records and hearing both sides, I find that the assessee, during the material period, was paying duty on their goods on a fortnightly basis in terms of Rule 8 of the Central Excise Rules, 2002. According to the fortnightly system of duty payment, the duty for the first fortnight of a calendar month is to be paid on or before the 20th day of that month and that for the second fortnight of the month is required to be paid on or before the 5th day of the succeeding month. On a conjoint reading of the relevant Rules, it is clear that this facility is available not only in respect of final products but also in respect of inputs and capital goods removed as such from the factory of production of final product. In respect of the capital goods removed from 'G' unit to 'S' unit on 25 -2 -2003 [in the second fortnight of February 2003], duty should have been paid by 5th March 2003. But the payment was made on 6th March only. In respect of the capital goods removed on 6 -2 -2003, duty should have been paid by the 20th of February 2003, but it was actually paid on 6 -3 -2003 only. For these delays, interest was paid by the assessee. A penalty to the extent of Rs. one lakh has been imposed on the assessee under Section 11AC.