2009 (2) TMI 676 - AT - Central Excise

Summary

Issues involved: Appeal against Order-in-Appeal disallowing Cenvat credit and confirming demand of duty u/s 11A(1), imposition of penalty u/s 11AB, and Rule 25 of Central Excise Rules, 2002.

The appellants, manufacturers of various excisable goods, availed Cenvat credit but faced disallowance of credit and demand of duty amounting to Rs. 49,798/- for taking excess credit without following refund procedure u/s 11B. The Commissioner (Appeals) upheld the penalty imposed under Rule 25 of Central Excise Rules, 2002. The appellants contested these decisions before the Tribunal seeking relief.

The main issue revolved around the appellants' claim of excess duty credit without following the prescribed refund procedure u/s 11B. The department contended that refund claims must be made to the Assistant Commissioner, whereas the appellants believed they could take credit based on a bona fide belief, supported by a precedent. The Tribunal noted conflicting views on the matter and referred to a relevant decision by the Larger Bench, which mandated filing refunds u/s 11B. The appellants had reversed the amount once the irregularity was pointed out, indicating no mala fide intent.

Regarding the imposition of a penalty of Rs. 10,000/- under Rule 25, the Tribunal found that the penalty was not justified. The Assistant Commissioner had acknowledged the absence of suppression of facts or wilful misstatement by the appellants. Rule 25 pertains to specific contraventions which were not proven against the appellants. The Tribunal considered the appellants' good faith belief in taking suo motu credit and the absence of mala fide intentions. Consequently, the penalty under Rule 25 was set aside, and the appeal was allowed in favor of the appellants.

In conclusion, the Tribunal ruled in favor of the appellants, allowing their appeal against the disallowance of Cenvat credit, demand of duty, and imposition of penalty under Rule 25 of the Central Excise Rules, 2002. The Tribunal emphasized the importance of following the prescribed refund procedures u/s 11B while acknowledging the appellants' good faith belief in taking credit and the absence of mala fide intent in their actions.