2009 (11) TMI 814 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Rule 13(1) of Cenvat Credit Rules, 2002 on the appellant.

Analysis:
The appellant, engaged in manufacturing Pet sheet and bottles chargeable to Central Excise Duty, had received pet resin from a registered dealer who had purchased it from a 100% EOU. The appellant took Cenvat credit on the invoices received from the dealer. The dispute arose regarding the availment of full credit of duty paid under invoices of a 100% EOU, which was not permissible as per Rule 3(6)(a)(i) of the Cenvat Credit Rules. The Asstt. Commissioner confirmed the demand for Cenvat credit along with interest and imposed a penalty of Rs. 75,000 under Rule 13(1). The Commissioner (Appeals) upheld this decision. The appellant, challenging the penalty imposition, contended that they were unaware of the source of the inputs and that they had taken credit only based on the dealer's invoices without knowledge of the EOU aspect.

Upon hearing both sides, the Tribunal noted that at the time of taking the credit, there was no irregularity as the appellant had taken credit only of the duty amount mentioned in the dealer's invoices. The invoices did not indicate the source of the goods from a 100% EOU or the full credit availed by the dealer based on EOU invoices. When the credit available to the dealer was reduced, the appellant promptly reversed the excess credit along with interest. Consequently, the Tribunal held that the penalty under Rule 13(1) was not warranted as there was no contravention at the time of taking the credit. The penalty imposed on the appellant was set aside, modifying the impugned order accordingly. The appeal was disposed of in favor of the appellant.

This judgment clarifies the application of Rule 13(1) of the Cenvat Credit Rules in cases where Cenvat credit is availed based on invoices from a registered dealer without knowledge of the source of the inputs. It emphasizes that penalties are not justified if the credit was taken in good faith based on the information available in the invoices. The decision highlights the importance of promptly rectifying any excess credit taken upon becoming aware of any irregularities, thereby demonstrating compliance with the rules and avoiding penalties.