2010 (1) TMI 1055 - AT - Central Excise

Summary

Issues:
Reduction of penalty under Section 11AC of the Central Excise Act from Rs. 1,01,746/- to Rs. 15,000 by the lower appellate authority.

Analysis:
The appeal was filed by the department challenging the reduction of penalty imposed on the respondent for availing certain Cenvat Credits during 2002-03. The show-cause notice invoked the extended period of limitation and proposed to appropriate the debits in Cenvat account towards the duty demand raised under the proviso to Section 11A(1) of the Act. The penalty was proposed under Rule 13(2) of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act for the breach of these rules. The original authority imposed a penalty of Rs. 1,01,746/-, which was reduced to Rs. 15,000/- by the appellate authority, leading to the department's challenge of this reduction.

The department argued that the original authority's decision should be restored as the show-cause notice alleged suppression of facts and contravention of the Cenvat Credit Rules with intent to evade duty payment. On the other hand, the respondent's counsel contended that during the relevant period, there was no legal obligation to reverse the Cenvat Credit in question. They highlighted that the liability to reverse such credit was introduced after the period in question, and the respondent had voluntarily reversed the credit without seeking any refund.

The respondent's counsel relied on the Tribunal's Larger Bench decision in a previous case to support their argument that there was no obligation to reverse the Cenvat Credit on inputs used in the manufacture of final products on a job work basis. Additionally, they referenced a High Court decision emphasizing the binding nature of the Tribunal's Larger Bench decision. The Tribunal found merit in the respondent's case against the reversal of Cenvat Credit and penalty under Section 11AC, noting that the show-cause notice did not allege any intent to evade duty payment. As there was no appeal against the penalty maintained by the appellate authority, the Tribunal dismissed the Revenue's appeal, emphasizing the lack of intent to evade duty as a crucial factor for imposing a penalty under Section 11AC.