2010 (8) TMI 556 - AT - Central Excise

Penalty - Procedural omission - Raw materials sent by the appellants to their job workers - After verification of the relevant records it was found that the goods sent to job workers though received back within 180days but entries had not been made which is basically a procedural omission - This itself would show that there was no intention to evade payment of duty - In the absence of any evidence to show that there was an attempt to divert the raw materials or not to utilize the same for the purpose for which they were obtained, it cannot be said that intention to evade payment of duty has been established - Under these circumstances imposition of penalty under Section 11AC read with Rule 15(2) of Cenvat Credit Rules cannot be sustained and is accordingly set aside.

Issues:
1. Failure to reverse cenvat credit on raw materials not received back within stipulated period.
2. Imposition of penalty on the appellant and authorized signatory for the above failure.
3. Discrepancies in records and reconciliation of facts.
4. Applicability of Section 11A(2B) regarding intention to evade payment of duty.
5. Procedural omission vs. intention to evade duty.
6. Reversal of penalty based on lack of evidence for intention to evade duty.

Analysis:

1. The central excise officers found that a large quantity of raw materials sent by the appellants to their job workers had not been received back within 180 days, leading to the failure to reverse the cenvat credit taken on such inputs. The authorized signatory admitted the lapse and reversed the credit, followed by paying interest. Penalty was imposed on the appellant and the authorized signatory.

2. The appellant argued that although the inputs were received back, no entries were made in the registers, resulting in duty liability discharge and interest payment. The appellant later verified records, submitted a statement to the Commissioner (Appeals), and claimed it was a procedural omission without intent to evade duty. The Department's rationale was reiterated by the learned DR.

3. The Tribunal considered the obligation to account for inputs with credit always resting with the manufacturer. The maintenance of dispatch registers for goods sent to job workers was acknowledged, with clerical omissions in making regular entries. The penalty was sustained based on reconciliation statements and a clerical error in an example cited by the Commissioner.

4. The Tribunal found merit in the appellant's arguments, deeming the omission procedural after verifying records. It was noted that there was no intention to evade duty, especially regarding the example cited by the Commissioner. The provisions of Section 11A(2B) were discussed, emphasizing the need for evidence to establish an intention to evade payment of duty.

5. The Tribunal concluded that in the absence of evidence showing an attempt to divert raw materials or not utilize them for the intended purpose, the intention to evade payment of duty could not be established. Therefore, the imposition of penalty under Section 11AC read with Rule 15(2) of Cenvat Credit Rules was set aside, leading to the allowance of the appeals filed by the appellants.

6. The penalty on the appellant company and the authorized signatory was set aside due to the lack of evidence supporting the intention to evade payment of duty, ultimately resulting in the appeals being allowed.

(Dictated & Pronounced in Court)

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