2009 (1) TMI 589 - AT - Central Excise

Summary

Issues involved: Appeal by Revenue for modifying order-in-appeal regarding non-imposition of penalty u/s 11AC and Rule 25(1) of Central Excise Rules, 2002 and Rule 13(2) of Cenvat Credit Rules, 2002.

Details of the Judgment:

1. The appeal was filed by the Revenue to modify the order-in-appeal dated 16-11-06 passed by CCE (Appeals) regarding non-imposition of penalty under Section 11AC. The case involved a shortage of 9829 ltrs. of base oil with Cenvat credit of Rs. 30,108/- detected during a visit to the Respondent's unit. The Respondent reversed the Cenvat credit related to the shortage. The Department issued a show cause notice for confirmation of the Cenvat credit demand and imposition of penalty under Section 11AC. The Assistant Commissioner refrained from imposing any penalty under Section 11AC, which was upheld by the Commissioner (Appeal).

2. During the proceedings, the Departmental Representative argued that the shortage of Cenvated input indicated clandestine removal, warranting penalty under Section 11AC. It was contended that penalty equal to 25% of the duty amount should have been imposed. Reference was made to a judgment of the Hon'ble Delhi High Court in a similar case.

3. The Tribunal considered the submissions and records. The shortage of 9828 ltrs. of base oil involving Cenvat credit of Rs. 30,108/- was detected during the visit. The Respondent initially admitted the shortage and reversed the Cenvat credit. However, during the personal hearing, it was claimed that there was no actual shortage and the credit was reversed based on a misunderstanding. The Assistant Commissioner refrained from imposing penalty under Section 11AC, as there was no evidence of clandestine clearance apart from the disputed shortage. The Tribunal agreed with the impugned order, stating that no circumstances warranted the imposition of penalty under Section 11AC. The Revenue's appeal was dismissed.

*(Dictated and pronounced in open court)*