2010 (1) TMI 709 - HC - Central Excise

Demand and Penalty - Assessee has decided to clear the CR coils in the domestic market, it paid duty on HR coils used in the CR coils, but instead of taking credit in Cenvat Credit account, it took credit in PLA - There was no dispute about the fact that the respondent assessee was eligible for credit on duty paid on CR coils - That was the only mistake that the assessee took the credit in PLA instead of Cenvat credit account, and for this, demand of duty more than Rs.1 crore has been confirmed against the assessee - The Tribunal has, therefore, taken the view that it is only a minor procedural mistake on the part of the respondent assessee - The Tribunal, therefore, felt that the duty demand and imposition of penalty are not justifiable - Order of Tribunal sustained.

Summary

Issues:
1. Whether the Tribunal was right in treating the violation of statutory provisions by the respondent as minor procedural mistakes?
2. Whether the Tribunal was correct in holding the respondent's action of taking CENVAT Credit in PLA instead of CENVAT Credit Account as a mistake?

Analysis:
1. The Commissioner imposed a penalty on the assessee for diverting HR coils for home consumption without paying the required duty. The Commissioner stated that duty paid on diverted HR coils would be available as CENVAT Credit in the CENVAT Credit Account, making the exercise revenue neutral. However, the Commissioner emphasized that duty paid on goods used as inputs does not exempt the payment of duty on those goods. Thus, a penalty of Rs.2 lakhs was imposed under Rule 25(1)(a) of the Central Excise Rules, 2002. The Tribunal, on appeal, noted that the assessee cleared CR coils in the domestic market and paid duty on HR coils used in them but mistakenly took credit in PLA instead of the CENVAT Credit Account. The Tribunal considered this a minor procedural mistake and set aside the duty demand and penalty. The High Court agreed with the Tribunal's findings, dismissing the appeal as it deemed the issue to be a procedural defect with no substantial legal question involved.

2. The Tribunal found that the only mistake made by the respondent was taking credit in PLA instead of the CENVAT Credit Account, resulting in a duty demand of over Rs.1 crore. The Tribunal viewed this as a minor procedural error on the part of the assessee. Consequently, the Tribunal set aside the duty demand and penalty imposed by the Commissioner, granting consequential relief to the respondent. The High Court concurred with the Tribunal's assessment, stating that the issue was merely a procedural defect and did not warrant any substantial legal questions. As a result, the High Court summarily dismissed the appeal, affirming the Tribunal's decision.