2009 (5) TMI 794 - AT - Central Excise

Summary

Issues:
1. Appeal against demand of interest under Section 11AB of the Act and penalty under Rule 15 of the CENVAT Credit Rules, 2004.
2. Appeal against non-imposition of penalty equal to the amount of CENVAT Credit under Section 11AC of the Act.

Analysis:
1. The appeal filed by the assessee contested the demand of interest and penalty imposed under Section 11AB of the Act and Rule 14 of the CENVAT Credit Rules, 2004. The department, on the other hand, appealed against the non-imposition of a penalty equal to the amount of CENVAT credit under Section 11AC of the Act.

2. The assessee had wrongly taken credit of the value of inputs instead of the duty paid on them, and also claimed full credit on capital goods when only 50% was admissible. The excess credit taken amounted to Rs. 8,58,950. The department demanded interest on this amount, which was contested by the appellant. The appellate authority upheld the interest demand of Rs. 47,228 at a rate of 15%. The appellant argued that no interest should be levied under Section 11AB and contested the penalty under Rule 15(2) of the CENVAT Credit Rules, 2004.

3. The Tribunal noted that Rule 14 of the CENVAT Credit Rules, 2004 mandates payment of interest by a manufacturer who wrongly takes CENVAT credit. The demand of interest under this rule was found to be sustainable. However, the appellant successfully argued against the imposition of a penalty under Rule 15 read with Section 11AC of the Act. The show-cause notice did not allege fraud or intent to evade duty, only a contravention of the CENVAT Credit Rules. As such, the conditions for imposing a penalty under Rule 15(2) were not met.

4. Consequently, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal to set aside the penalty. The decision highlighted the distinction between the demand for interest, which was upheld, and the penalty, which was deemed unjustified due to the absence of evidence of fraudulent intent or evasion of duty.

Conclusion:
The Tribunal upheld the demand of interest under Rule 14 of the CENVAT Credit Rules, 2004 but set aside the penalty imposed under Rule 15(2) read with Section 11AC of the Act. The judgment emphasized the necessity of meeting specific conditions, such as fraudulent intent, for the imposition of penalties under the relevant provisions.