2014 (5) TMI 450 - AT - Central Excise

Penalty - Notification No. 6/2006-CE - cenvat credit in respect of common inputs - Held that - Demand along with interest is confirmed, as not contested by the appellant. As regards penalty we agree with the ld. Advocate that this was a bonafide mistake on their part. There was no intention to evade duty inasmuch as the entire facts of availment of cenvat credit in respect of common inputs and clearance of their final products under an exemption notification, were being reflected by them in their monthly returns. As such, the entire facts were with the Revenue and the appellant was also never guided by the Department to reverse the 10% amount. As such, we are of the view that imposition of penalty to the extent of 100% in terms of Rule 15 (1) of Cenvat Credit Rules is not justified. However, inasmuch as there has been a procedural and technical offence, though without any malafide, we deem it fit to put the appellant to some penalty. We accordingly reduce the penalty to 10% of the duty amount. - Decided partly in favour of assessee.

Summary

Issues:
1. Appellants availed exemption but did not reverse 10% amount as required by Rule 6(6) of Cenvat Credit Rules, 2004.
2. Show cause notice issued for non-reversal of amount, interest, and penalty.
3. Appellants reversed the amount during adjudication but sought non-imposition of penalty.
4. Dispute over the applicability of Rule 6(6) in case of exempted goods supplied against international bidding.
5. Revenue argued that ignorance of law is not an excuse and penalty under Rule 15(1) is justified.
6. Tribunal considered both sides' submissions and reduced the penalty imposed on the appellant.

Analysis:
1. The appellants, manufacturers of wire and cables, supplied goods to Delhi Metro under an exemption but failed to reverse 10% amount as required by Rule 6(6) of Cenvat Credit Rules, 2004, resulting in a show cause notice for non-compliance.
2. During adjudication, the appellants reversed the amount in question along with interest but requested non-imposition of penalty, citing lack of intention to evade duty and arguing that the Revenue was aware of the facts through regular returns.
3. The appellant's advocate acknowledged the demand but contended that they believed Rule 6(6) did not apply to exempted goods supplied against international bidding, seeking reduction of the penalty due to a genuine misunderstanding.
4. The Revenue argued that ignorance of the law is not a valid defense, insisting that the penalty under Rule 15(1) was justified, emphasizing the appellant's obligation to reverse the amount despite their belief.
5. The Tribunal upheld the demand and interest but agreed with the appellant's argument that the non-reversal was a genuine mistake, reducing the penalty from 100% to 10% of the duty amount due to procedural and technical non-compliance without malice, ultimately disposing of the stay petition and appeal accordingly.