2010 (6) TMI 699 - AT - Central Excise

Summary

Issues involved:
The issues involved in the judgment are related to the contravention of provisions of Cenvat Credit Rules, 2002 by the appellants, specifically regarding the availing of Cenvat credit without maintaining separate accounts for inputs used in the manufacture of dutiable final products and exempted goods, leading to the imposition of penalty.

Details of the Judgment:

Manufacture of Air Compressors & Parts:
The appellants were engaged in the manufacture of air compressors & parts classifiable under Chapter sub-heading 8414.80 and 8414.90 of the Central Excise Tariff Act, 1985. They had been availing Cenvat credit on inputs and capital goods u/s Cenvat Credit Rules, 2002.

Contravention of Cenvat Credit Rules, 2002:
The investigation revealed that the appellants had availed Cenvat credit without maintaining separate accounts for inputs used in dutiable final products and exempted goods for the period March 2002 to July 2003. Show cause notices were issued, leading to the imposition of penalty and demands by the authorities.

Imposition of Penalty:
The Assistant Commissioner confirmed a demand of Rs. 1,16,331/- along with interest and penalty for non-compliance with the Cenvat Credit Rules. The Commissioner (Appeals) upheld the order, leading to the present appeals challenging the imposition of penalty.

Legal Arguments:
The appellants argued that while there was a contravention of Rule 6(2) of the Cenvat Credit Rules, 2002, there was no fraud, wilful mis-statement, collusion, or intent to evade duty on their part. They cited the decision of the Bombay High Court and provisions of Rule 13(2) to support their contention that penalty imposition requires specific conditions to be met.

Decision of the Tribunal:
The Tribunal observed that non-maintenance of separate accounts for inputs did amount to wrongful utilization of Cenvat credit. However, without evidence of fraud, wilful mis-statement, collusion, or intent to evade duty, imposition of penalty was not justified. The appeals partly succeeded, and the imposition of penalty was quashed and set aside.

Conclusion:
The Tribunal partially allowed the appeals, setting aside the imposition of penalty due to lack of evidence of fraudulent intent or wilful mis-statement by the appellants. The impugned orders were upheld, and no further interference was deemed necessary.