2011 (5) TMI 170 - AT - Central Excise

Penalty u/s 11AC - The burden of establishing suppression lies on the Revenue and in the present case beyond an averment that capital goods cleared as scrap without payment of duty were those on which credit had been availed by the assessees, there is no evidence to show that CENVAT credit had been availed on the capital goods - Therefore, the charge of suppression cannot be sustained - Therefore, penal provisions of Section 11AC cannot be attracted against the assessees in this case - Accordingly, set aside the penalty and allow the appeals.

Summary

Issues:
Challenge to imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
The appeal before the Appellate Tribunal CESTAT, CHENNAI involved the challenge against the imposition of a penalty of Rs.86,464 under Section 11AC of the Central Excise Act, 1944. The case revolved around manufacturers of polyester/viscose blended weaving yarn who had cleared capital goods as scrap without paying the appropriate duty as required under Rule 3(5A) of the CENVAT Credit Rules, 2005. The assessees contended that the capital goods were purchased in 1993 before the introduction of CENVAT facility on capital goods, and thus, the provisions of Rule 3(5A) were not applicable to them. Despite paying the duty and interest, the department alleged suppression of availing CENVAT credit on the capital goods. The assessees argued that the burden of proving suppression lies with the Revenue, and without concrete evidence of availing CENVAT credit on the capital goods, the charge of suppression could not be sustained.

The Tribunal carefully considered the submissions from both sides and found merit in the assessees' argument regarding the burden of proof on the Revenue to establish suppression. It was noted that beyond a mere assertion that the cleared capital goods had availed CENVAT credit, there was no concrete evidence to support this claim. As a result, the Tribunal concluded that the charge of suppression could not be sustained in the absence of clear proof of availing CENVAT credit on the capital goods. Consequently, the penal provisions of Section 11AC were deemed inapplicable in this case. Therefore, the Tribunal set aside the penalty imposed and allowed the appeals in favor of the assessees.