2012 (7) TMI 676 - AT - Central Excise

Penalty Denial of Cenvat credit on Boomer Tattoo - manufacture of chewing gum/bubble gum Held that - If the credit was being availed by reflecting the same in the statutory records and proper ER-1 returns were being filed, it cannot be said that there was any suppressions on mis-statement with any malafide intent on the part of the assessee - issue involved in the present appeal is of legal interpretation of the provisions of Modvat Rules and is capable of interpretation in favour of the assessee also. As such the respondents cannot be faulted upon for availing the benefit of Modvat credit in respect of Tattoos so as to impose penalty upon them - no reason to impose any penalty on the respondents - denial of Modvat credit upheld, penalty is not required to be imposed-

Summary

Issues:
1. Denial of Modvat credit on Boomer Tattoo/Printed Transfers
2. Imposition of penalty under Rule 13(2) read with Section 11AC of Central Excise Act, 1944

Analysis:

Issue 1: Denial of Modvat credit on Boomer Tattoo/Printed Transfers
The case involved the denial of Modvat credit amounting to Rs.70,90,852/- availed by the respondents for Boomer Tattoo/Printed Transfers under Chapter 17 of the Central Excise Tariff Act. The Commissioner initially allowed the credit, but the Revenue appealed to the Tribunal. The Tribunal, in Final Order No.98/10-Ex, held that the Modvat credit was not eligible for the said Tattoos/Printed Transfers. The Tribunal cited previous cases and Commissioner's findings to support its decision. It declared the credit as illegal, recoverable by the department with interest and imposed a penalty under Rule 13(2) read with Section 11AC of the Central Excise Act, 1944.

Issue 2: Imposition of penalty under Rule 13(2) read with Section 11AC of Central Excise Act, 1944
The Tribunal imposed a penalty equal to the amount of the duty on the respondents under Rule 13(2) read with Section 11AC of the Central Excise Act, 1944. The respondents challenged this penalty imposition before the Hon'ble High Court of Punjab & Haryana. The High Court referred to relevant case laws and observed that the Tribunal did not provide reasons for imposing the penalty when there was no malafide intent in availing the credit. The High Court remitted the matter back to the Tribunal to reconsider the imposition of the penalty in light of the Adjudicating Authority's earlier order and the nature of the default, if any, committed by the appellants.

The Tribunal, upon reconsideration, noted that the Modvat credit issue was a matter of legal interpretation and that there was no evidence of malafide intent on the part of the respondents. It also highlighted that the penalty for the period prior to the appeal had been set aside by the Commissioner (Appeals) and not challenged by the Revenue, thus attaining finality. Consequently, the Tribunal held that no penalty should be imposed on the respondents, as the issue was capable of interpretation in favor of the assessee. The Tribunal disposed of the Revenue's appeal by not imposing any penalty despite allowing the denial of Modvat credit.

In conclusion, the Tribunal's judgment addressed the denial of Modvat credit and the imposition of a penalty under Rule 13(2) read with Section 11AC of the Central Excise Act, 1944. The detailed analysis considered legal interpretations, previous decisions, and the absence of malafide intent in availing the credit, leading to the Tribunal's decision not to impose a penalty on the respondents despite allowing the denial of Modvat credit.