2010 (1) TMI 1058 - AT - Central Excise

Summary

Issues:
Penalty imposed under Rule 14 of Cenvat Credit Rules, 2004 and Section 11AC of Central Excise Act, demand of interest under Section 11AB of the Act.

Analysis:
The appellant appealed against a penalty of Rs 42,201/- and interest demand imposed under Rule 14 of the Cenvat Credit Rules, 2004 and Section 11AC of the Central Excise Act. The original authority disallowed Cenvat Credit of the same amount to the appellant and ordered its recovery under Rule 14. The adjudicating authority also sought to levy interest under Section 11AB for the delay in reversing the credit. A penalty was imposed under Rule 15 read with Section 11AC, which was affirmed by the Commissioner (Appeals), leading to the present appeal by the assessee.

The appellant, engaged in manufacturing bulk drugs, sent inputs including furnace oil to a sister unit for manufacturing intermediate products on a job work basis. The department alleged that excess furnace oil dispatched to the sister unit was used for their own product, leading to the disallowance of Cenvat Credit of Rs. 42,201/-. The show-cause notice accused the appellant of suppressing facts and intentionally availing inadmissible credit. The appellant argued that there was no evidence of supplying excess inputs to the sister unit for their own product manufacturing. The judge noted that if the job worker misused inputs, action should have been taken against them. Lack of evidence showing collusion or knowledge of misuse by the appellant led to the conclusion that Sections 11AB and 11AC were not applicable.

In the final decision, the impugned order was set aside to the extent challenged in the appeal, and the appeal was allowed. The judgment highlighted the importance of specific attribution of intent to evade duty in invoking Sections 11AB and 11AC against the appellant, emphasizing the need for evidence to support allegations of misuse of Cenvat Credit.