2006 (9) TMI 409 - AT - Central Excise

Summary

Issues:
1. Availment of Cenvat credit on capital goods and simultaneous claim of depreciation under Section 32 of Income-tax Act.
2. Recovery of reversed amount under Rule 4(4) of Cenvat Credit Rules, 2002.
3. Imposition of penalty under Rule 13 of Cenvat Credit Rules, 2002.
4. Appeal against penalty reduction to Rs. 9,000.
5. Consideration of Section 11AC of the Act in imposing penalty.
6. Allegation of fraud, wilful mis-statement, collusion, or suppression of facts.
7. Discretion of adjudicating authority in imposing penalty.

Analysis:

1. The case involved the availing of Cenvat credit on capital goods while also claiming depreciation under Section 32 of the Income-tax Act. Upon scrutiny, the reversed amount was subject to recovery under Rule 4(4) of Cenvat Credit Rules, 2002. A show cause notice was issued, leading to an adjudication by the Assistant Commissioner who imposed a penalty under Rule 13 of Cenvat Credit Rules, 2002. The appellant appealed against the penalty amount, which was reduced to Rs. 9,000 by the Commissioner (Appeals).

2. The appellant contended that the penalty imposed did not consider the provisions under Section 11AC of the Act, citing a relevant case law. However, the Commissioner (Appeals) had taken into account the decision and relevant circulars, reducing the penalty based on mitigating circumstances. The issue of limitation was not specifically addressed in the order, as the focus was on the penalty imposition rather than duty demand.

3. The examination of facts revealed no intention to evade duty, a crucial element for invoking Rule 13 of Cenvat Credit Rules, 2002. The appellant had inadvertently contravened the provisions of the Income-tax Act, resulting in double benefit. The argument for invoking Section 11AC penalty provisions based on fraud or wilful misstatement was dismissed, as there was no evidence of such intent. The case law and past decisions supported the view that no duty demand existed, especially since the amount had been reversed before the show cause notice.

4. The judgment emphasized the discretion of the adjudicating authority in penalty imposition, citing relevant case law. Ultimately, the appeal by the Revenue was dismissed, upholding the Commissioner (Appeals)' decision to reduce the penalty to Rs. 9,000. The ruling confirmed that there was no valid ground to interfere with the lower authority's findings, leading to the dismissal of the Revenue's appeal.