2009 (8) TMI 1039 - AT - Central Excise

Summary

Issues involved: Denial of CENVAT credit under Section 11A, interest under Section 11AB, penalty under Rule 15 of CENVAT Credit Rules, 2004.

Denial of CENVAT credit under Section 11A: The lower authority denied CENVAT credit of over Rs. 14.7 crores to the appellant under Section 11A of the Central Excise Act read with Rule 14 of the CENVAT Credit Rules, 2004 for the period September, 2004 to June, 2006. The denial was based on the ground that the additional duty of excise was recoverable from the input-supplier due to alleged suppression of facts with intent to evade duty. However, the appellant argued that the input-supplier had obtained immunity from penalty under the Settlement Commission's order, and proceedings against them were dropped by the Commissioner at Chennai. The appellant claimed a prima facie case against the denial of CENVAT credit and connected penalty.

Interest under Section 11AB and Penalty under Rule 15: In addition to denying the CENVAT credit, the lower authority also demanded interest under Section 11AB of the Act and imposed a penalty of Rs. 10 lakhs on the appellant under Rule 15 of the CENVAT Credit Rules, 2004. The appellant contested these demands based on the immunity granted to the input-supplier by the Settlement Commission, arguing that the denial of credit and penalty were untenable in light of the Settlement Commission's order and the Commissioner's decision at Chennai.

Settlement Commission's Order and Commissioner's Decision: The Settlement Commission accepted payment of additional duty by the input-supplier to the extent of over Rs. 31.5 crores and granted immunity from penalty and prosecution under the Central Excise Act. The Commissioner at Chennai, in a separate order, held that where immunity was granted by the Settlement Commission to the input supplier against penal liability, it was incorrect to deny CENVAT credit to the manufacturer of final products based on supplementary invoices issued by the input-supplier. The Commissioner's decision favored the appellant, and since there was no appeal by the department against this order, the Tribunal granted waiver of pre-deposit and stay of recovery in respect of the dues adjudged against the appellant.