2009 (11) TMI 785 - AT - Central Excise

Summary

Issues Involved:
- Reduction of penalty under Rule 14 of the Cenvat Credit Rules, 2004.
- Imposition of mandatory penalty under Section 11AC of C. Ex. Act, 1944.
- Interpretation of Rule 4(5)(a) of Cenvat Credit Rules, 2004.
- Validity of show-cause notice and time bar for imposing penalty.

Analysis:

1. Reduction of Penalty under Rule 14:
The appeal was filed by the Revenue against the impugned order where the penalty was reduced to Rs. 2,000. The respondents sent inputs to job workers but did not receive them back within the stipulated 180 days. The penalty was imposed under Rule 14 of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) reduced the penalty to Rs. 2,000. The Revenue contended that failure to reverse Cenvat credit amounts to evasion of duty, relying on relevant case laws. However, the Advocate for the respondents argued that there was no intention to evade duty due to a shortage of inputs at the end of job workers.

2. Imposition of Mandatory Penalty under Section 11AC:
The Revenue argued that the respondents' failure to reverse Cenvat credit after 180 days amounts to evasion of duty, necessitating a penalty equivalent to the duty amount under Section 11AC of the Central Excise Act, 1944. The Advocate for the respondents, however, contended that in cases of input shortage, where mens rea to evade duty is absent, no penalty can be imposed. Case laws were cited to support this argument.

3. Interpretation of Rule 4(5)(a) of Cenvat Credit Rules, 2004:
The Commissioner (Appeals) analyzed Rule 4(5)(a) which deals with the non-reversal of Cenvat credit due to non-receipt of inputs within 180 days. The Commissioner noted that the rule allows for re-availment of reversed Cenvat credit without a time limit, leading to the conclusion that imposition of a mandatory penalty may not be justified in such cases. The Commissioner upheld the penalty under Rule 15(1) of the Cenvat Credit Rules, 2004, due to the violation of the rules.

4. Validity of Show-Cause Notice and Time Bar for Imposing Penalty:
The Advocate for the respondents argued that the show-cause notice was time-barred and that the penalty could not be imposed without proving an intention to evade payment of duty. The Tribunal upheld the impugned order, stating that the Revenue failed to establish any mala fide intention on the part of the respondents to evade duty. The appeal filed by the Revenue was rejected, and the cross objection was disposed of.

In conclusion, the Tribunal upheld the impugned order, emphasizing the lack of evidence of intentional evasion of duty by the respondents. The decision highlighted the importance of proving mens rea in cases of alleged duty evasion and provided a detailed interpretation of the relevant rules and legal provisions governing Cenvat credit reversal and penalty imposition.