2013 (11) TMI 1017 - AT - Central Excise

Wrong Quotation of Penalty in the show cause notice Revenue proposed penalty under Rule 15 (1) of Cenvat Credit Rules, 2004 but imposed Penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - The Appellants were not put to notice - Held that - The cenvat credit has not been availed by suppressing any facts or by way of mis-declaration - The show-cause notice has proposed a penalty under Rule 15 (1) of the Cenvat Credit Rules, 2004 where penalty has been imposed under Rule 15 (2) of the said Rules There was no substance in the contention of the Revenue that it was a mere wrong quotation of Rules. Following Devans Moderen Breweries Ltd. Vs. Commissioner of Central Excise, Chandigarh 2006 (8) TMI 15 - SUPREME COURT OF INDIA - before imposition of penalty under the relevant Rules, the relevant Acts or omissions are required to be disclosed, so as to enable the notice to submit the reply to the allegation of violation of Rules quoted in the notice - The imposition of penalty under Rule 15 (2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944, is bad in law, thus set aside Decided in favour of Assessee.

Summary

Issues:
- Availment of cenvat credit against input invoices delivered at the site
- Imposition of penalty under Rule 15 (2) of the Cenvat Credit Rules, 2004

Analysis:
1. Availment of cenvat credit against input invoices delivered at the site:
The case involved the appellant, engaged in manufacturing Air Pollution Control Equipment, who erroneously availed cenvat credit against input invoices delivered at the installation site, not their factory. The appellant realized the mistake and paid back the cenvat credit along with interest. The issue was whether the appellant's actions warranted the imposition of a penalty.

2. Imposition of penalty under Rule 15 (2) of the Cenvat Credit Rules, 2004:
The Adjudicating Authority imposed a penalty under Rule 15 (2) of the Cenvat Credit Rules, 2004, for wrongful availing of cenvat credit due to fraud, collusion, or wilful misstatement. However, the appellant argued that they had not suppressed any facts and had rectified the error promptly upon discovery. The appellant contended that the penalty imposed was incorrect as the show-cause notice had proposed a penalty under Rule 15 (1) instead. The issue was whether the penalty imposed was justified under the circumstances.

3. The Tribunal examined the facts and found that the appellant had availed cenvat credit in error but had rectified it by reversing the amount along with interest. The Tribunal noted that the penalty under Rule 15 (2) was imposed without proper notice to the appellant, as the show-cause notice had mentioned a penalty under Rule 15 (1). The Tribunal referred to a Supreme Court decision emphasizing the importance of disclosing relevant acts or omissions before imposing a penalty. As the penalty was imposed under the wrong rule without proper notice, the Tribunal deemed it unjustified and set it aside.

4. In conclusion, the Tribunal modified the order to set aside the penalty of Rs.3,06,277 imposed under Rule 15 (2) of the Cenvat Credit Rules, 2004. The appeal was disposed of based on the findings that the penalty imposition was incorrect due to the lack of proper notice and disclosure of relevant acts or omissions.