2010 (11) TMI 281 - HC - Central Excise

Appeal u/s 35G - Demand - Search - Cenavt credit - Insofar as invocation of the provisions of Section 11AC of the Act and Rule 25 of the Rules is concerned, in the entire order of the adjudicating authority there is no finding to the effect that there is any fraud, misrepresentation or suppression of facts or that there is contravention of the provisions of the Act or Rules with intent to evade payment of duty on the part of the assessee - In the circumstances, in the absence of any such finding having been recorded by the adjudicating authority, the question of imposing penalty under Section 11AC of the Act and Rule 25 of the Rules would not arise - The appeal is accordingly dismissed

Summary

Issues:
- Challenge to order imposing penalty under Rule 27 of Central Excise Rules
- Justification of not appreciating Order-In-Original No. MP/30/ Offence/07-08
- Entitlement to CENVAT credit on M.S. Drums
- Imposition of penalty under Rule 27 of Central Excise Rules
- Invocation of Section 11AC of the Act and Rule 25 of the Rules

Analysis:

1. The appellant-revenue challenged an order imposing penalty under Rule 27 of the Central Excise Rules, 2002, related to the wrong availment of CENVAT credit on M.S. Drums. The respondent, engaged in manufacturing M.S. Barrels, purchased M.S. Drums without undertaking any manufacturing process, availed CENVAT credit, and sold them without bringing to the factory. The Commissioner (Appeals) allowed the appeal, noting that even without manufacturing, if excise duty was paid, CENVAT credit could be availed. The Tribunal upheld most of the Commissioner's decision but imposed a penalty under Rule 27 due to a technical lapse.

2. The main contention was the entitlement to CENVAT credit on M.S. Drums. The appellant argued that as the drums were not used as inputs for manufacturing, CENVAT credit should not have been availed. However, both the Commissioner (Appeals) and the Tribunal found that the credit was utilized for duty payment on the final product, making the transaction revenue-neutral. The Tribunal imposed a penalty for procedural non-compliance.

3. The appellant further contested the invocation of Section 11AC of the Act and Rule 25 of the Rules. It was argued that without evidence of fraud or intent to evade duty, penalties should not have been imposed. The absence of findings regarding fraud or misrepresentation led to the conclusion that penalties under Section 11AC and Rule 25 were not warranted.

4. The judgment concluded that there was no legal basis to interfere with the Tribunal's decision. No substantial question of law arose from the order, and the appeal was dismissed. The Tribunal's decision to impose a penalty under Rule 27 was upheld, considering the technical lapse, while rejecting the imposition of penalties under Section 11AC and Rule 25 due to the lack of evidence of fraud or intent to evade duty.