2014 (4) TMI 5 - AT - Central Excise

Penalty under Rule 15 of Cenvat Credit Rules 2004 - Suppression of fact - Intention to evade duty - Held that - respondent claiming cenvat credit in respect of capital goods along with monthly return specifically took the plea that the items were used for manufacturing frame on the top brass section of the plant. In these circumstances, the allegation of suppression of fact with intent to evade duty is not sustainable - Decided against Revenue.

Summary

Issues:
- Challenge to the order upholding demand of duty but setting aside penalty under Rule 15 of Cenvat Credit Rules 2004.

Analysis:
1. The Revenue appealed against the order by the Commissioner (Appeals) upholding the duty demand but setting aside the penalty under Rule 15 of Cenvat Credit Rules 2004. The Revenue contended that Rule 15(2) of the Cenvat Credit Rules imposes a penalty if credit of duty on input or capital goods is wrongly taken due to fraud, willful misstatement, collusion, or contravention of Excise Act provisions to evade duty payment.

2. The respondent claimed credit for duty paid on items like HR plates, HR coils, MS bar, angle & channels, girders, and plates as capital goods. However, they failed to prove the use of these items as components or accessories of capital goods. Consequently, the respondent falls under Rule 15(2) of Cenvat Credit Rules along with Section 11AC of the Excise Act, 1944.

3. The respondent argued that the items in question were used in the top brass in the duplex section of the plant. They cited divergent views on the issue before the Larger Bench decision in a specific case. The respondent claimed that it was not a case warranting a penalty imposition.

4. The Revenue sought to impose a penalty under Rule 15(2) of Cenvat Credit Rules, 2004. The rule states that if CENVAT credit is wrongly taken due to fraud, collusion, willful misstatement, or contravention of Excise Act provisions to evade duty payment, the manufacturer is liable to pay a penalty under Section 11AC of the Excise Act.

5. The respondent, in their defense, stated that they claimed CENVAT credit for capital goods in their monthly returns, mentioning the items were used for manufacturing frames in the plant's top brass section. They argued that there was no suppression of facts with an intent to evade duty. Consequently, the allegation of intent to evade duty through suppression of facts was deemed unsustainable, leading to the dismissal of the Revenue's appeal.

6. In conclusion, the appeal filed by the Revenue challenging the order upholding the demand of duty but setting aside the penalty under Rule 15 of Cenvat Credit Rules 2004 was dismissed. The judgment highlighted the importance of proving the legitimate use of items claimed as capital goods to avoid penalties under the Cenvat Credit Rules.