2013 (9) TMI 381 - AT - Central Excise

Penalty under Rule 15 of the CENVAT Credit Rules 2004 - appellant pleaed that no penalty was attracted where the CENVAT credit in question had been reversed without utilization - Held that - The penalty was set aside and allow this appeal by way of remand with a direction to the original authority to ascertain the correct facts and take fresh decision on the question whether the appellant is liable to be penalized under Section 15 of the CENVAT Credit Rules 2004 on the ground of contravention of Rule 10 and, if so, to what extent - Needless to say that the appellant should be given a reasonable opportunity of being heard. There was a valid reason for remanding of the case to the original authority for fresh decision on the question whether a penalty under Rule 15 of the CENVAT Credit Rules 2004 was warranted and, if so, to what extent - It appeared from the records that the penalty was imposed for contravention of Rule 3(1) read with Rule 10 of the CENVAT Credit Rules 2004. Rule 3 was a substantive provision providing for CENVAT credit as a benefit to be claimed by a manufacturer of final products or a provider of taxable service - This benefit was allowed on inputs, capital goods and input services - Rule 3 also specifies the purposes for which the credit can be utilized - There were also provisions under Rule 3 which deal with situations such as what to be done with the CENVAT credit taken on inputs or capital goods when such inputs/capital goods are removed as such from the factory Decided in favour of Assessee.

Summary

Issues:
- Appeal against penalty imposed under Rule 15 of CENVAT Credit Rules 2004.
- Transfer of CENVAT credit without compliance with Rule 10.
- Contravention of Rule 3(1) and Rule 10.
- Remanding the case for fresh decision on penalty.

Analysis:
1. The appeal was filed against a penalty of Rs. 25,000 imposed on the assessee under Rule 15 of the CENVAT Credit Rules 2004, which was upheld by the first appellate authority. The appellant did not request a personal hearing but submitted written arguments citing previous tribunal decisions and a Supreme Court ruling. The main contention was that no penalty should apply if the CENVAT credit in question was reversed without utilization.

2. The case involved the shifting of the manufacturing unit from Bangalore to Hubli, with an unutilized CENVAT credit of 2,64,226/- at the time of relocation. Various letters were exchanged between the appellant and excise authorities regarding the transfer of the unit and the CENVAT credit. The original authority demanded interest and imposed a penalty of Rs. 25,000 under Rule 15(i) of the CENVAT Credit Rules 2004. The Commissioner (Appeals) set aside the interest demand but upheld the penalty. The current appeal challenged the penalty on the grounds that the benefit of CENVAT credit should not be denied due to technical non-compliance with Rule 10.

3. The Judge noted that Rule 3 provides for CENVAT credit benefits, while Rule 10 allows for the transfer of unutilized credit in case of factory relocation. It was observed that the appellant did not seek permission from the proper officer before transferring the credit from Bangalore to Hubli. The Judge found a need to remand the case to the original authority for a fresh decision on the penalty under Rule 15, considering the contravention of Rule 10. The appellant should be given a fair opportunity to present their case in light of the factual discrepancies regarding the dates of credit transfer and reversal.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, and the reasoning behind the decision to remand the case for further consideration on the penalty imposed under the CENVAT Credit Rules 2004.