2009 (11) TMI 793 - AT - Central Excise

Summary

Issues:
- Appeal against Commissioner (Appeals) order dated 17-10-07 regarding Cenvat credit on imported goods.

Analysis:
The appellants received imported inputs and availed Cenvat credit, including education cess on basic customs duty. Audit pointed out the mistake, leading to the reversal of the credit and payment of interest. The Department issued a show cause notice proposing penal action under Rule 15 of Cenvat Credit Rules for wrongly utilizing the credit. The original authority imposed a penalty of Rs. 4,31,394, alleging that the appellant knowingly withheld Government dues, indicating lack of bona fide intention. On appeal, the penalty was reduced to Rs. 1.50 lakhs by the Commissioner (Appeals), considering that the credit reversal was prompted by the Range Officer's observation.

The appellants argued that the mistake was unintentional, as they were not aware that education cess on basic customs duty was not creditable during the initial Education Cess period. They promptly rectified the error upon notification by the audit party and the Range Officer. They contended that there was no deliberate intention to evade duty, citing a Tribunal decision where penalties for non-deliberate contraventions were minimal. The appellants highlighted that under Rule 15(1) of Cenvat Credit Rules, the prescribed minimum penalty for similar situations was only Rs. 2000.

After considering both sides' submissions, the judge acknowledged the mistake in availing the ineligible credit but found no evidence of deliberate intention to misuse it. The judge accepted the appellant's explanation that the error occurred due to confusion during the initial implementation of the Education Cess. Consequently, the penalty imposed by the Commissioner (Appeals) was further reduced to Rs. 10,000, taking into account the circumstances of the case.

In conclusion, the appeal was partly allowed, and the penalty was reduced to Rs. 10,000, considering the unintentional nature of the mistake and the prompt rectification by the appellants upon notification.