2013 (1) TMI 145 - AT - Central Excise

Enhancement of penalty - Wrong availment of CENVAT credit - Rule 12 of the CENVAT Credit Rules, 2002 - Penalty under Rule 15(1) - Import duty-free inputs under advance licences issued by the DGFT - Excisable goods manufactured from these inputs were supplied to Power Grid Corporation of India Limited (PGCIL) without payment of duty in terms of Notification No.108/95-CE dated 28.8.1995 - These products were intended to be used in the execution of PGCI s project financed by World Bank - However, as World Bank loan did not materialize, a major condition attached to Notification No.108/95-CE remanded without compliance - PGCIL decided to discharge central excise duty liability in respect of the goods supplied to them by the appellant - Also paid the custom duties (BCD CVD SAD) foregone in respect of the inputs (components) imported by the appellant under DEEC scheme - Following this payment of duties of customs by PGCIL, the appellant took CENVAT credit of the CVD - Subsequently, World Bank funding of PGCIL s project was cleared and eventually the customs duties paid by PGCIL came to be refunded to them - SCN issued on ground that challan used for availing CENVAT credit was not a valid document for such availment of credit Held that - It is borne on record that the CENVAT credit of CVD taken by the appellant was reversed by them soon after the changed circumstances were noted by them. The enhancement of penalty by the lower appellate authority is, therefore, not justifiable. In favour of assessee

Summary

Issues:
1. Confirmation of demand of duty and penalty imposition under CENVAT Credit Rules, 2002.
2. Appeal against the appellate Commissioner's order regarding duty, interest, and penalty enhancement.

Analysis:
1. The judgment deals with the confirmation of demand of duty and penalty imposition under the CENVAT Credit Rules, 2002. The original authority confirmed a demand of duty against the appellant for wrong availment of CENVAT credit and imposed a penalty. The appellant then appealed to the Commissioner (Appeals), who confirmed the demand of duty, interest, and enhanced the penalty. The appellant's appeal is directed against the appellate Commissioner's order. The appellant had imported duty-free inputs under advance licenses and supplied manufactured goods without duty payment. However, due to changes in circumstances, the appellant reversed the CENVAT credit. The tribunal examined the grounds of appeal and found no serious challenge to the demand of duty/interest but noted that the enhancement of penalty was disproportionate to the offense found against the appellant.

2. The tribunal considered the appellant's submission that they had reversed the CENVAT credit as soon as they became aware of the refund obtained by the Power Grid Corporation of India Limited (PGCIL). The tribunal found merit in the appellant's argument and held that the enhancement of penalty was not justified. The tribunal concluded that since the appellant had no serious grievance against the demand of duty/interest, the enhancement of penalty was set aside, and the rest of the impugned order was sustained. Therefore, the appellant's appeal was disposed of accordingly, with the penalty enhancement being overturned.