2012 (9) TMI 419 - AT - Central Excise

Non-accounting of consumption of inputs - penalty under rule 27 - Held that - As the proceedings were initiated for not accounting of consumption of 23594.380 Kgs. of inputs namely CI Casting in their daily stock account for the period from December, 2000 to March, 2004 and the demand was issued on 27.12.2005 beyond the normal period prescribed under section 11A which has been made applicable as per the provisions of Rule 12 of CENVAT Credit Rules, 2002. As there is was no allegation of suppression, willful misstatement in the show cause notice and the department could not bring out that the appellant have removed the inputs or finished goods or scrap clandestinely in these circumstances the demand is hit by limitation of time - in favour of assessee.

Summary

Issues:
1. Application of Rule 12 of CENVAT Credit Rules, 2002 for demand raised beyond the normal period.
2. Allegations of suppression or willful misstatement.
3. Imposition of penalty exceeding the maximum limit under Rule 27.
4. Verification of case and percentage of recovery.
5. Clandestine removal of inputs or finished goods.

Analysis:

1. The appellant challenged the demand raised against them for non-accounting of inputs in their daily stock account for the period from December, 2000 to March, 2004. The appellant contended that the demand issued on 27.12.2005 was beyond the normal period prescribed under Rule 12 of CENVAT Credit Rules, 2002. The appellant argued that the provisions of section 11A were made applicable under Rule 12. The Tribunal noted that there was no allegation of suppression or willful misstatement in the show cause notice. Consequently, the demand was held to be hit by the limitation of time, and both lower authorities were deemed to have exceeded the scope of the show cause notice.

2. The appellant also contested the imposition of a penalty exceeding the maximum limit under Rule 27. The appellant pointed out that the penalty imposed was Rs. 39,886, whereas the maximum penalty under Rule 27 was Rs. 5,000. The Tribunal acknowledged this discrepancy and found that no provision of law was invoked to justify the higher penalty. As a result, the penalty imposed was considered unsustainable.

3. The appellant raised concerns regarding the verification of the case and percentage of recovery, emphasizing that there was no evidence of clandestine removal of inputs, finished goods, or scrap. The Tribunal observed that the department failed to establish any clandestine removal by the appellant. In the absence of such evidence, the demand and penalty were deemed unjustified.

4. The Tribunal ultimately set aside the order of the ld. Commissioner (Appeals) as it was found to be unsustainable. The appeal was allowed in favor of the appellant based on the grounds of the demand being time-barred, the penalty exceeding the statutory limit, and the lack of evidence supporting allegations of clandestine removal. The judgment highlighted the importance of adhering to procedural requirements and ensuring that penalties are imposed within the limits prescribed by law.