2005 (5) TMI 471 - AT - Central Excise

Summary

Issues:
1. Admissibility of Cenvat credit on imported inputs.
2. Imposition of penalty under Section 11AC of the Central Excise Act.
3. Demand of interest under Section 11AB of the Act.
4. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.

Admissibility of Cenvat credit on imported inputs:
The appellants had taken Cenvat credit of Basic Customs Duty, Countervailing Duty, and Special Additional Customs Duty on their imported inputs. The Department alleged that the appellants had illegally taken Cenvat credit of Basic Customs Duty and Special Additional Customs Duty, which the party admitted and reversed. The original authority imposed a penalty under Section 11AC of the Central Excise Act, and interest under Section 11AB on the delayed duty payment. The party appealed against the penalty and interest imposed.

Imposition of penalty under Section 11AC:
The original authority imposed a penalty under Section 11AC of the Central Excise Act on the appellants for wilful availment of undue Cenvat credit. The Commissioner (Appeals) vacated the Section 11AC penalty but imposed a penalty under Rule 25 of the Central Excise Rules, 2002 for the party's carelessness in availing Cenvat credit. The party appealed against this penalty.

Demand of interest under Section 11AB:
The party claimed that no interest should be levied under Section 11AB as the short-paid duty was voluntarily paid pursuant to the Department's direction in the show-cause notice. The Department argued that the proviso to Section 11AB(1) was not applicable in this case. The Tribunal rejected the party's argument, stating that the proviso applies only if duty is voluntarily paid in full following an order, instruction, or direction by the Board under Section 37B.

Imposition of penalty under Rule 25:
The party argued that the appellate authority could not impose a penalty under Rule 25 as the original authority had dropped the penalty, which became final. The Tribunal agreed with the party, citing a similar case precedent, and set aside the penalty imposed by the lower appellate authority under Rule 25.

In conclusion, the Tribunal partially allowed the appeal, sustaining the demand of interest under Section 11AB but setting aside the penalty imposed under Rule 25.