2015 (2) TMI 789 - AT - Central Excise

Cenvat Credit - Transfer of credit - amalgamation - On granting common registration for these two divisions, the appellant merged the separate Cenvat credit accounts of the two divisions. At that time there was some Cenvat credit balance available in the Excel Fibre Division which was used commonly for payment of duty on all the finished products including the Viscose staple fibre - Held that - Impugned order is an Ex-parte order passed without hearing the appellant. Prima Facie, we also find that the judgment of Hon ble Madras High Court in the case of CCE Madurai vs Rajshree Sugars and Chemicals Ltd. reported in 2013 (6) TMI 654 - MADRAS HIGH COURT , appears to be applicable to the facts of this case but this judgment has not been considered by the Commissioner and he decided the matter Ex-parte. In any case we do not find any justification as to how the penalty of ₹ 50 lakh can be imposed on the appellant company under Rule 27 of the Central Excise Rule 2002, the maximum penalty imposable under which is only 5000/-.The impugned order is, therefore, set aside and the matter is remanded to the Commissioner for denovo adjudication after hearing the appellant and also keeping in view the judgment of hon ble Madras high Court in the case of Rajshree Sugar and Chemicals Ltd.(Supra). - Decided in favour of assessee.

Summary

Issues:
Transfer of Cenvat Credit between divisions upon common registration; Imposition of penalty under Rule 27 of Central Excise Rule 2002.

Transfer of Cenvat Credit:
The appellant, with two manufacturing divisions, merged their separate Cenvat credit accounts upon obtaining a single registration. The department contended that this transfer of credit was not permissible under Rule 10 of the Cenvat Credit Rule 2004. The Commissioner, through an ex-parte order, demanded a Cenvat credit amount with interest and imposed penalties. The appellant argued that a similar case decided by the Madras High Court favored their position, and the penalty imposed was disproportionate. The Tribunal acknowledged the relevance of the Madras High Court judgment and found the penalty excessive. Consequently, the Tribunal set aside the order and remanded the matter to the Commissioner for a fresh adjudication, considering the appellant's arguments and the Madras High Court judgment.

Imposition of Penalty under Rule 27:
The appellant contested the imposition of a substantial penalty of Rs. 50 lakh under Rule 27 of the Central Excise Rule 2002, highlighting that the maximum penalty under this rule was only Rs. 5000. The Tribunal agreed with the appellant, deeming the penalty amount unreasonable and not in accordance with the prescribed limit. Consequently, the Tribunal set aside the penalty imposed under Rule 27 and directed the matter to be re-adjudicated by the Commissioner, ensuring a fair hearing for the appellant and taking into account the Madras High Court judgment's applicability.

In conclusion, the Tribunal found the ex-parte order unjust, considering the relevant legal precedents and the disproportionate penalty imposed. The Tribunal set aside the order, remanding the case for a fresh adjudication by the Commissioner, with instructions to consider the appellant's arguments, the Madras High Court judgment, and to ensure a fair hearing.