2013 (11) TMI 843 - AT - Central Excise

Penalty under Rule 15 (1) of cenvat credit rules 2004 Retrospective amendment in Rule 6 of cenvat credit rules 2004 for proportionate reversal of credit part of generated electricity utilizing the inputs on which cenvat credit availed, were sold outsiders, therefore, the Appellants are not eligible to cenvat credit - Held that - In view of the specific Explanation contained in the retrospective amendment no penalty could be imposed the Commissioner himself had acknowledged that both the Department and the Assessee were in a wrong notion on the applicability of relevant provisions during the said period there was no merit in imposing penalty on the Assessee Thus, imposition of penalty of Rupees two lakhs under Rule 15 (1) of the Cenvat Credit Rules, 2004, set aside Decided in favour of Assessee.

Summary

Issues:
- Imposition of penalty under Rule 15 (1) of the Cenvat Credit Rules, 2004.

Analysis:
The appeal was filed against an Order-in-Original passed by the Commissioner of Central Excise & Customs. The case involved the Appellant, engaged in manufacturing activities, who had installed a Captive Power Plant for electricity generation. The dispute arose regarding the eligibility of cenvat credit on inputs used in electricity generation and sold to outsiders. The Appellant had calculated and reversed the proportionate cenvat credit utilized in the generation of electricity sold outside. The Commissioner accepted the payment and interest but imposed a penalty of Rs.2.00 lakhs under Rule 15 (1) of the Cenvat Credit Rules, 2004. The Appellant challenged the penalty imposition in the appeal.

The Appellant's representative argued that the retrospective amendment to Rule 6 of the Cenvat Credit Rules, 2004 allowed for the reversal of proportionate cenvat credit on inputs used in exempted products. Referring to Section 72 & 73 of the Finance Act, 2010, the Appellant had followed the prescribed procedure for reversing the cenvat credit. The representative contended that the penalty imposed was unjustified, citing Explanation II to sub-section (5) of Section 72/73 of the Finance Act, 2010, which prohibits penalty imposition on reversal of proportionate credit. A previous Tribunal judgment was also cited to support this argument.

The Revenue's representative supported the Commissioner's findings without presenting any contradictory decisions. After hearing both sides and examining the records, the Judge noted that the issue centered on the reversal of cenvat credit availed by the Appellant for electricity generation. The Judge highlighted the retrospective amendment under Section 72/73 of the Finance Act, 2010, which allowed for the reversal of proportionate credit on inputs used in exempted products. The Judge emphasized the specific Explanation in the amendment precluding penalty imposition in such cases. Given the acknowledgment by the Commissioner of misunderstanding the applicability of relevant provisions during the period in question, the Judge concluded that the penalty of Rs.2.00 lakhs under Rule 15 (1) of the Cenvat Credit Rules, 2004, was unwarranted. Consequently, the penalty was set aside, and the order was modified accordingly. The appeal was disposed of in favor of the Appellant.