2005 (11) TMI 298 - AT - Central Excise

Summary

Issues:
Challenge to imposition of 25% duty liability penalty under Section 11AC of the Central Excise Act, 1944 for contravening Cenvat Credit Rules, 2002.

Analysis:
The appellant, a manufacturer of Motor Vehicles, contested the penalty imposed for clearing tools, dies, and moulds to other manufacturers while availing CENVAT credit. They argued that they acted in good faith, believing they were eligible for credit upon return of the goods. The appellant highlighted receiving a Certificate for outstanding performance in duty payment. The appellant's counsel emphasized the concept of revenue neutrality and pleaded for penalty exemption due to their genuine belief.

The Respondent, represented by the learned SDR, opposed the appellant's plea for penalty exemption. They argued that the appellant did not merit a bona fide belief defense, as they took three months to reverse the credit upon being informed of the contravention. The Respondent stressed the clarity of the rule requiring immediate credit reversal before any show cause notice issuance. The Commissioner (Appeals) and the Original authority had already shown leniency by reducing the penalty to 25%.

Upon careful consideration, the Judge noted the appellant's stature as a major manufacturer, presuming awareness of all legal provisions. The absence of any supportive judgments, trade notices, or Circulars favoring the appellant's belief was highlighted. The Judge emphasized the clear rule mandating credit reversal before transferring goods to other manufacturers, deeming the appellant's actions as a violation attracting penalties. The Judge dismissed the appellant's argument about payment of duty and receiving an award, stating they were insufficient grounds for penalty reduction. The appellate authority's decision to impose a 25% penalty instead of 100% was upheld, requiring the appellant to pre-deposit the penalty amount during the stay application hearing. Ultimately, the appeal was rejected due to lack of merit, affirming the impugned order.

The judgment was dictated and pronounced in open court on 17-11-2005.