2009 (10) TMI 798 - AT - Central Excise

Contravention of provision of Rule 6 of CCR 2001 - suppression of the relevant transactions - whether the respondents had no liability to pay the amount at 8% of the sale value of the product in question for the period prior to 1st July 2001 on the ground that there was no machinery provision for the recovery of the said amount under the Central Excise Act or the Rules made thereunder?

Issues:
1. Interpretation of Rule 6 of Cenvat Credit Rules, 2001 regarding recovery of amount.
2. Existence of machinery provision for enforcement of liability prior to 1st July, 2001.
3. Retrospective enforceability of machinery provisions under Section 82 of the Finance Act, 2005.
4. Imposition of penalty in cases of failure to pay the amount under Rule 6.
5. Justification of penalty imposition in absence of statutory procedure.

Issue 1: Interpretation of Rule 6 of Cenvat Credit Rules, 2001 regarding recovery of amount:
The appeal involved a dispute over the liability of the respondent to pay an amount at 8% of the sale value of the product in question as per Rule 6 of the Cenvat Credit Rules, 2001. The Commissioner (Appeals) held that the demand for the period prior to 1st July, 2001 was not sustainable due to the absence of machinery provision for recovery before that date. The Tribunal examined the provisions of Rule 6 and related rules to determine the enforceability of the said amount.

Issue 2: Existence of machinery provision for enforcement of liability prior to 1st July, 2001:
The Tribunal considered whether machinery provisions for the recovery of the amount payable under Rule 6 existed before 1st July, 2001. The Commissioner (Appeals) had ruled that prior to this date, there was no mechanism for recovering the amount as prescribed by Rule 6. The Tribunal analyzed the provisions of the Central Excise Act and Rules to ascertain the presence of machinery provisions for enforcement of such liabilities before the specified date.

Issue 3: Retrospective enforceability of machinery provisions under Section 82 of the Finance Act, 2005:
The learned Advocate argued that the Finance Act, 2005 introduced machinery provisions retrospectively to enforce the obligations under Rule 6 and related rules. Referring to Section 82 of the Finance Act, 2005, the Advocate highlighted that the amendments made the liability enforceable even for periods before 1st July, 2001. The Tribunal examined the retrospective enforceability of the machinery provisions in light of the amended legislation.

Issue 4: Imposition of penalty in cases of failure to pay the amount under Rule 6:
The Tribunal deliberated on the imposition of penalties in cases where the manufacturer failed to pay the amount as required under Rule 6. The learned Advocate contended that there was no provision for penalty imposition specifically related to the failure to pay the amount under the said rules. The Tribunal assessed the legality and justification of imposing penalties in such circumstances.

Issue 5: Justification of penalty imposition in absence of statutory procedure:
The Tribunal addressed the imposition of penalties despite the absence of a statutory procedure for recovering the amount under Rule 6 before a certain date. It was argued that penalties imposed in such cases lacked legal support. The Tribunal considered whether the penalties imposed were valid in the absence of a clear statutory framework for enforcing the payment obligation.

In conclusion, the Tribunal partially allowed the appeal, setting aside the reduction in demand made by the Commissioner (Appeals) and confirming the demand as per the adjudicating authority's order. However, the Tribunal overturned the penalty imposition by both the Commissioner (Appeals) and the original authority, emphasizing the lack of statutory support for penalties in cases of non-payment as required under Rule 6.

← Previous Next →