2013 (12) TMI 1397 - HC - Central Excise

Availment of benefit of Cenvat credit - Inputs/capital goods used for manufacture and clearance of dutiable and exempted finished goods Held that - The remand had been made to the Tribunal and in the order of remand, it was also directed to consider the provision of section 11AC and the Tribunal had specifically noted that none of the two authorities below had availed any option to the assessee to pay duty demand with interest and penalty of 25% of the duty within 30 days from the date of adjudication - the Tribunal in its order maintained that the case of the assessee is squarely covered by the explanation to Section 11AC. The duty determined under Section 11AC (2) was subsequent to the year 2000 - the case would be covered by the explanation to Section 11AC of the Central Excise Act - When no option was given by any of the adjudicating authorities after determination for payment of duty, interest and penalty of 25% of the duty Decided against Revenue.

Summary

Issues:
1. Interpretation of Section 11AC of the Central Excise Act, 1944 regarding reduced penalty.
2. Authority of the Customs, Excise & Service Tax Appellate Tribunal to award the option of reduced penalty.

Analysis:

Issue 1: Interpretation of Section 11AC of the Central Excise Act, 1944 regarding reduced penalty:
The case involved an assessee engaged in manufacturing MS Tubes & pipes who availed Cenvat credit on inputs/capital goods for both dutiable and exempted finished goods. A show cause notice was issued for recovery of wrongly availed Cenvat credit. The Order-in-Original confirmed the demand and imposed a penalty. The assessee appealed to the Commissioner, Central Excise (Appeals), which was rejected. The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) decided the appeal, holding against the assessee on merit. The Tribunal directed the respondent to pay the differential duty within thirty days from the date of its order, offering an option to pay a penalty equivalent to 25% of the duty amount. The Tribunal's decision was based on a previous court ruling in the case of M/s. Akash Fashion Limited. The Tribunal's decision was challenged, arguing that such leniency in penalty payment goes against the law's objective. However, the High Court upheld the Tribunal's decision, citing the consistent view that the assessee should be given the option to pay duty demand, interest, and 25% penalty within 30 days from the adjudication date.

Issue 2: Authority of the Customs, Excise & Service Tax Appellate Tribunal to award the option of reduced penalty:
The High Court noted that neither the Order-in-Original nor the Commissioner (Appeals) granted the assessee the benefit of reduced penalty. The Court referred to a previous decision involving a similar question of law where it was concluded that the assessee should be given the option to pay duty demand, interest, and 25% penalty within 30 days from the adjudication date. In this case, since no such option was given by the adjudicating authorities, the Tribunal's decision to offer the option to the assessee was in line with the explanation to Section 11AC of the Central Excise Act. The Court emphasized that the Tribunal's action was consistent with previous rulings and upheld the Tribunal's decision to allow the reduced penalty payment option to the respondent-assessee. Consequently, the Tax Appeal was dismissed based on these grounds.