2009 (6) TMI 853 - AT - Central Excise

Summary

Issues involved: Incorrect imposition of penalty u/s 11AC of the Central Excise Act, 1944 instead of Rule 15 of the CENVAT Credit Rules, 2004; Validity of penalty enhancement by lower Appellate Authority; Entitlement to file Cross Objection against penalty imposition.

Summary:

Issue 1: Incorrect imposition of penalty u/s 11AC of the Central Excise Act, 1944

The Appellants wrongly claimed 100% credit for capital goods received in 2004-05, later rectified by informing the Department and reversing the credit with interest. The Original Authority imposed a token penalty of Rs. 1,000, incorrectly invoking Section 11AC instead of Rule 15 of the CENVAT Credit Rules. The Appellants argued that Section 11AC is inapplicable as its conditions are not met. The Tribunal agreed, noting the voluntary disclosure by the Appellants and the absence of Departmental intervention. The penalty enhancement to Rs. 83,598 by the lower Appellate Authority was deemed unjustified.

Issue 2: Validity of penalty enhancement by lower Appellate Authority

Upon review of the case records, the Tribunal found the Appellants' contentions valid. The voluntary disclosure of the error by the Appellants, payment of interest on the wrongly claimed credit (not utilized), and lack of Departmental intervention were considered. The Tribunal concluded that the penalty enhancement to Rs. 83,598 was unwarranted. Additionally, the lower Appellate Authority's refusal to entertain the Cross Objection due to the absence of an appeal against the initial penalty of Rs. 1,000 was deemed unjust, as it hindered the purpose of the Cross Appeal provision.

Issue 3: Entitlement to file Cross Objection against penalty imposition

The Tribunal set aside the lower Appellate Authority's order, restoring the Original Authority's decision. The Appellants had already paid the initial penalty of Rs. 1,000 and did not seek its waiver. The Appeal was allowed, and the Stay Petition was disposed of accordingly.