2014 (10) TMI 373 - AT - Central Excise

Penalty under Rule 15 of Cenvat Credit Rules, 2005 - Shortage in stock - Held that - Rule 15 of Cenvat Credit Rules, 2004. Sub-rule (1) of the said Rule provides imposition of penalty not exceeding the duty on the excisable goods, where a person has taken the Cenvat credit wrongly or in contravention of any provisions of the said Rules. Admittedly, the said sub-rule is not applicable inasmuch as the dispute does not relate to taking of wrong Cenvat credit. Sub-rule (2) of the said Rule relates to the wrong utilisation of the Cenvat credit taken, on account of fraud, wilful statement, collusion or suppression of facts, etc. Admittedly, in the present case, appellants after taking the Cenvat credit on the sponge iron have removed the said goods with a mala fide intend to utilise the credit so taken. In such situation, the provisions of sub-rule (2) would apply. The said sub-rule provides imposition of penalty in terms of provisions of Section 11AC of Central Excise Act, 1944. Section 11AC of the Act provides if the penalty imposed is deposited within a period of 30 days to the extent of 25%, the penalty shall stand reduced to that extent. Inasmuch as in the present case, the appellant has admittedly deposited the duty along with 25% of penalty within the period specified under Section 11AC of the Act, I am of the opinion that this is a fit case for reduction of penalty. penalty is reduced to 25% of the duty demand - Decided partly in favour of assessee.

Issues:
1. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2005 without specifying sub-rule.
2. Challenge against penalty imposition and reduction sought before Commissioner (Appeals).
3. Interpretation of Rule 15 of Cenvat Credit Rules, 2004 regarding penalty imposition for wrong utilization of Cenvat credit.
4. Application of Section 11AC of Central Excise Act, 1944 for penalty reduction.

Analysis:
The judgment dealt with the imposition of a penalty under Rule 15 of Cenvat Credit Rules, 2005 without specifying the sub-rule by the Asst. Commissioner of Central Excise. The Commissioner (Appeals) upheld the penalty without providing any reduction, citing Rule 15 does not allow for such reduction. However, the Member (J) analyzed Rule 15 of Cenvat Credit Rules, 2004, where sub-rule (1) pertains to wrongly taking Cenvat credit, not applicable in this case. Sub-rule (2) relates to wrong utilization of Cenvat credit due to fraud or suppression of facts, which was the situation here. This sub-rule allows for penalty imposition as per Section 11AC of the Central Excise Act, 1944. The Member (J) noted that since the appellant had deposited the duty and 25% of the penalty within 30 days as per Section 11AC, a reduction in penalty was warranted.

The appellants had challenged the order before the Commissioner (Appeals) seeking a reduction in the penalty. However, the Commissioner (Appeals) refused to grant the reduction, stating that Rule 15 of Cenvat Credit Rules, 2004 does not provide for such reduction. The Member (J) disagreed with this interpretation and delved into the specific sub-rules of Rule 15 to determine the correct application of penalty provisions. It was highlighted that the penalty was imposed for the wrong utilization of Cenvat credit, falling under sub-rule (2) which allows for penalty as per Section 11AC of the Central Excise Act, 1944.

In conclusion, the Member (J) upheld the demand as uncontested and reduced the penalty to 25% of the duty demand. The judgment emphasized the correct application of penalty provisions under Rule 15 of Cenvat Credit Rules, 2004, and the significance of complying with Section 11AC of the Central Excise Act, 1944 for penalty reduction. The appeal was disposed of with the penalty reduction in favor of the appellant based on the timely deposit of duty and a portion of the penalty.

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