2006 (11) TMI 69 - AT - Central Excise

Cenvat/Modvat Alleged that appellant has availed credit in order to evade payment of duty and accordingly imposes penalty on him After considering all the fact authority realizes that there is no intention of evasion and penalty set aside

Summary

Issues:
1. Interpretation of Section 11AC regarding non-payment of duty.
2. Availment of excess credit and intention to evade payment of duty.
3. Application of Rule 13(2) of Cenvat Credit Rules.
4. Imposition of penalty under Section 11AC.

Analysis:
The judgment revolves around the interpretation of Section 11AC concerning non-payment of duty and the intention behind such actions. The High Court directed the Tribunal to determine whether the non-payment of duty was due to fraud, collusion, wilful misstatement, suppression of facts, or contravention of the law with the intent to evade duty. The appellant claimed that the demand arose from mistakenly availing credit on basic customs duty and countervailing duty instead of the correct credit. They rectified the error upon detection. The appellant argued that the proviso to Section 11A and Rule 13(2) of Cenvat Credit Rules did not apply due to the absence of wrongful intent. The Department contended that the appellant intentionally availed excess credit to evade duty payment by utilizing it for excise duty on cleared goods.

The Tribunal considered both submissions and noted that the appellant promptly reversed the excess credit upon notification by the authorities. It was acknowledged that the appellant had correctly reported the credit availed in their returns and that no evidence suggested intentional wrongful availing of excess credit to evade duty payment. The Tribunal highlighted Rule 13(2), emphasizing that penalty under Section 11AC is applicable in cases of fraud, willful misstatement, collusion, or contravention with the intent to evade duty. Since there was no evidence of such intent, the Tribunal ruled that the penalty imposed was unwarranted. The Tribunal found no proof of suppression, collusion, or misstatement by the appellant to avail excess credit with the intent to evade duty. Consequently, the Tribunal set aside the penalty imposed on the appellant, allowing the appeal against the penalty.

In conclusion, the Tribunal's decision focused on the lack of evidence supporting the intentional wrongful availing of excess credit by the appellant to evade duty payment. The judgment emphasized the importance of proving fraudulent intent or contravention to apply penalties under Section 11AC or Rule 13(2) of the Cenvat Credit Rules. The Tribunal's ruling highlighted the necessity of establishing deliberate wrongdoing to justify penalty imposition, ultimately favoring the appellant due to the absence of such evidence.