2015 (3) TMI 422 - AT - Central Excise

Denial of CENVAT Credit - penalty under Rule 13 of the CENVAT Credit Rules, 2002 - Held that - Penalty under Rule 13 can be imposed on the person who is taking credit. In this case, the credit has been taken by M/s. Anthea Aromatics P. Ltd. and not by Shri Vincent Paul. Therefore, following the aforesaid decision, I hold that the penalty on Shri Vincent Paul is not sustainable - Coming to the penalty imposed on M/s. Anthea Aromatics P. Ltd. the show-cause notice alleges that assessee has intentionally/wrongly availed credit. When the department is also of the view that credit has taken wrongly then it cannot be held that it has been taken intentionally, as intentionally' and wrongly' are contrary terms. These terms cannot be applied concurrently. Therefore, the conclusion is drawn that the appellant has taken credit wrongly. Therefore, the penalty under Rule 13 (2) cannot be imposed. - Commissioner has observed that penalty under Rule 13(1) can be imposed on the appellant but he further observed that the appellant has not been able to make out a case for reduction of penalty. But he failed to discuss why the appellant has not made out a case for reduction of penalty. In this case, the appellant has apparently lost the refund admissible to them. Therefore, the appellant has made out a case for leniency in imposing penalty - Penalty reduced - Decided partly in favour of assesse.

Summary

Issues:
Appeal against penalty under Rule 13 of the CENVAT Credit Rules, 2002.
1. Abatement of appeal due to the demise of an individual.
2. Imposition of penalty for taking inadmissible credit.
3. Applicability of penalty on different individuals involved.
4. Consideration of intention in imposing penalties.
5. Reduction of penalty amount based on circumstances.

Analysis:
1. The judgment addressed the abatement of the appeal due to the demise of an individual involved in the case. The counsel submitted the death certificate to support the claim, leading to the disposal of the appeal concerning the deceased individual.

2. The issue of imposing penalties for taking inadmissible credit was extensively discussed. The appellant had taken credit of the refund attributable to exports, which was found to be inadmissible upon departmental scrutiny. The counsel argued against the imposition of penalties, highlighting the lack of specific intention in the show-cause notice. The judgment differentiated between penalties under Rule 13(1) and Rule 13(2) and concluded that the penalty under Rule 13(2) cannot be imposed as the appellant had taken credit wrongly, not intentionally.

3. The judgment differentiated between individuals involved in the case regarding the imposition of penalties. It was held that penalties could not be imposed on an individual who had not directly taken the credit, following a precedent. The penalty on the individual not directly involved was set aside, while the penalty on the entity taking the credit was deliberated further.

4. The aspect of intention in imposing penalties was thoroughly examined. The judgment emphasized the distinction between taking credit wrongly and intentionally, stating that these terms are contrary and cannot be applied concurrently. It was concluded that as the credit was taken wrongly, the penalty under Rule 13(2) could not be imposed.

5. The judgment considered the circumstances of the case in reducing the penalty amount. The Commissioner's failure to discuss why the appellant had not made out a case for a penalty reduction was noted. Given that the appellant had already lost the refund admissible on exported goods, leniency in imposing the penalty was warranted. Consequently, the penalty amount was reduced to Rs. 50,000 based on the appellant's case for leniency.

Overall, the judgment provided a detailed analysis of the issues surrounding the imposition of penalties under the CENVAT Credit Rules, considering factors such as intention, individual liability, and circumstances warranting penalty reduction.