2013 (11) TMI 1218 - AT - Central Excise

Suo motu re-credit availed Non-compliance of the Procedures of Central Excise Act, 1944 Penalty under Rule 15(1) imposed Held that - Following BDH Industries Ltd. vs. CCE(Appeals), Mumbai-I 2008 (7) TMI 78 - CESTAT MUMBAI Suo motu credit is not permissible - All types of refund claim be there of excess duty paid or otherwise are to be filed under Section 11B and have to pass the proof of not passing on the incidence of duty to others - There is no evidence/material brought on record by the Revenue that suo motu recredit had been availed by the Appellant with a mala fide intention - Penalty under Rule 15(1) of the CENVAT Credit Rules, 2004 on the Appellant is unwarranted and unjustified - Thus, the imposition of penalty under Rule 15(1) of the Rules set aside - Decided partly in favour of Assessee.

Summary

Issues:
- Availing suo motu recredit without following proper procedure
- Imposition of penalty under Rule 15(1) of the CENVAT Credit Rules, 2004

Analysis:

Issue 1: Availing suo motu recredit without following proper procedure
The case involved the Appellant, engaged in manufacturing, who availed recredit of CENVAT Credit reversed earlier suo motu without following the proper procedure. The demand notice alleged non-compliance with the provisions of the Central Excise Act, 1944 and the relevant Rules. The Deputy Commissioner confirmed the demand and imposed a penalty under Rule 15(1) of the CENVAT Credit Rules, 2004. The Appellant, aggrieved by the order, appealed to the Commissioner of Central Excise (Appeals) and subsequently to the Appellate Tribunal.

Analysis of Arguments:
The Appellant's advocate argued that the suo motu recredit was permissible, citing a Tribunal judgment in a similar case. Even if not permissible, since the credit was availed in good faith, no penalty should be imposed. The Revenue's representative contended that taking suo motu credit was impermissible as established by a Larger Bench decision, and thus, penalty imposition was justified.

Judgment on Issue 1:
The Tribunal referenced the Larger Bench decision in the BDH Industries case, which clarified that no provision allowed for the suo motu taking of credit without proper sanction. The Tribunal emphasized that all refund claims must adhere to Section 11B of the Central Excise Act and Rules, and no suo motu credit could be taken without satisfying the department that the duty incidence had not been passed on. Consequently, the Tribunal disallowed the suo motu recredit by the Appellant. However, noting the absence of evidence of mala fide intention in the Appellant's actions and the conflicting opinions prior to the Larger Bench decision, the Tribunal deemed the penalty unwarranted and set it aside.

Issue 2: Imposition of penalty under Rule 15(1) of the CENVAT Credit Rules, 2004
The Tribunal found the penalty imposition on the Appellant unjustified due to the lack of evidence of mala fide intent and the conflicting opinions existing before the Larger Bench decision. Therefore, the Tribunal set aside the penalty under Rule 15(1) of the CENVAT Credit Rules, 2004, partially allowing the Appellant's appeal.

In conclusion, the Tribunal partially allowed the appeal, setting aside the penalty under Rule 15(1) of the CENVAT Credit Rules, 2004, based on the absence of evidence of mala fide intent and the pre-existing conflicting opinions on the issue of availing suo motu recredit.