2014 (10) TMI 758 - HC - Central Excise

Denial of CENVAT Credit - assessee availed the credit of CVD as paid as per the direction of settlement commission - levy of penalty would on the Managing Director and the Authorized Signatory - Held that - Settlement Commission in its order has given a categorical finding that as the consequence of their order, the assessees are entitled to a certificate of payment of Counter Veiling duty from the Jurisdictional Commissioner or the DRI who are duty bound to issue such certificate. Consequently, the certificates issued by the DRI in consequence of the order of the Settlement Commission is perfectly legal. Further, Rule 57E is not applicable. We find that the Counter Veiling duty was paid by the assessee in August, 2002 and the certificate was issued on 6th August, 2002 by the DRI. The Cenvat Credit Rules, 2002 came into existence with effect from 1st March, 2002 and, consequently, the Cenvat Credit Rules became applicable. We are of the opinion that Rule 57E of the Central Excise Rules, 1944 is not applicable in the instant case. With regard to imposition of penalty for contravening the provision of Rule 57E(3), (4) and (5) of the Central Excise Rules, 1944 and Rule 7(1)(b) of the Cenvat Credit Rules, 2002, the Settlement Commission granted full immunity to the assessee for levy of penalty or fine under the Act in respect of matters covered in the dispute. - contravention done the Ex-Managing Director and the Authorised Signatory was one of the dispute which was settled by the Settlement Commission and, consequently, it was no longer open to the department to issue a show cause notice for levying such penalty - Decided against Revenue.

Summary

Issues:
1. Admissibility of credit of additional customs duty wrongly availed by the respondent.
2. Imposition of penalties on the respondent and individuals for contravening provisions of Central Excise Rules and Cenvat Credit Rules.

Analysis:

Issue 1: Admissibility of credit of additional customs duty:
The case involved the respondent, engaged in manufacturing cosmetic preparations, who availed CENVAT credit of duty paid on inputs and capital goods. A show cause notice was issued by the department for wrongly availing CENVAT credit, demanding customs duty. The respondent settled the matter before the Custom and Central Excise Settlement Commission, paying the Counter Veiling Duty as directed. The Commission granted immunity from prosecution, penalty, and fine, and allowed the respondent to claim MODVAT credit. Subsequently, the respondent availed CENVAT credit based on a certificate issued by the Directorate of Revenue Intelligence (DRI). However, the department issued a show cause notice questioning the admissibility of the credit. The Tribunal allowed the respondent's appeal, setting aside the penalty and duty imposed by the Commissioner. The department appealed, raising the issue of admissibility of the credit.

Issue 2: Imposition of penalties for contravening rules:
The department argued that the certificate issued by the DRI was invalid as it should have been issued by the Superintendent of Central Excise under Rule 57E(4) of the Central Excise Rules, 1944. However, the court found the certificate valid, as the Settlement Commission's order entitled the respondent to such a certificate from the DRI. The court held that Rule 57E was not applicable in this case, as the Cenvat Credit Rules, 2002 were in force. Regarding penalties for contravening rules, the court noted that the Settlement Commission had granted full immunity to the respondent from penalties related to the dispute. Therefore, the department could not impose penalties on the respondent or individuals for contraventions settled by the Commission.

In conclusion, the court dismissed the department's appeal, ruling in favor of the respondent on both issues. The court held that the credit of additional customs duty availed by the respondent based on the DRI certificate was admissible, and penalties could not be imposed for contraventions covered by the Settlement Commission's order.