2015 (7) TMI 424 - AT - Central Excise

Imposition of penalty and interest - Imposition of equivalent penalty under Rule 15 of the Cenvat Credit Rules, 2004, read with Section 11AC of Central Excise Act, 1944 - demand of interest under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11AB of Central Excise Act, 1944 - Held that - one of the employee of the appellant has engaged himself in fraudulent act, so as to enrich himself, by availing Cenvat Credit on the invoices raised by the supplier without receipt of inputs. It is to be noted that the appellant company had lodged a FIR on 23.01.2007 against the said employee with local police station. At the outset, I would record that the interest liability needs to be discharged by the appellant as per Rule 14 of Cenvat Credit Rules, 2004. The liability arises even if the improperly availed Cenvat Credit is not utilized, as per law settled by the Supreme Court. Accordingly, I uphold the interest liability on the appellant and direct them to pay the same without 30 days, on being informed by lower authority or their own ascertainment. As regards the penalty of an amount equivalent to the confirmed demand, I find that there is no dispute as to the fact, that the employee of the appellant company was involved in fraudulent act for his personal gain. The act of the individual employee in availing improper Cenvat Credit cannot be attributed to appellant as a mala-fide act, as the act of fraud admittedly is not authorized and can never be authorized by the management of the appellant company. In my considered view, equal penalty imposed is unwarranted. In view of the foregoing, in the facts and circumstances in this case, I set aside the equal penalty imposed on the appellant company. - Decided partly in favour of assessee.

Summary

Issues:
Imposition of equivalent penalty under Rule 15 of the Cenvat Credit Rules, 2004, read with Section 11AC of Central Excise Act, 1944, and demand of interest under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11AB of Central Excise Act, 1944.

Analysis:
The appeal was against Order-in-Appeal confirming the demand of interest and equivalent penalty imposed by the adjudicating authority. The appellant, engaged in manufacturing excisable goods, had availed Cenvat Credit on invoices without receiving goods, leading to a reversal of credit upon detection by departmental officers. The appellant argued that the fraudulent credit availed was due to an employee's misconduct, against whom a FIR was lodged. The appellant contended that no interest should be paid as the wrongly availed credit was not utilized, and penalty should not be imposed due to the absence of intent to avail incorrect credit.

The departmental representative supported the penalty and interest imposition, attributing the fraudulent act of the employee to the appellant company. The Tribunal examined the facts and noted the employee's fraudulent actions to benefit himself by availing Cenvat Credit without actual receipt of inputs. The appellant had filed a FIR against the employee. The Tribunal upheld the interest liability on the appellant as per Rule 14 of the Cenvat Credit Rules, even if the credit was not utilized, citing Supreme Court precedents. However, the Tribunal found that the employee's fraudulent act could not be deemed as authorized by the company's management, thus setting aside the equivalent penalty imposed on the appellant.

In conclusion, the Tribunal upheld the interest liability on the appellant but set aside the equivalent penalty, considering the employee's actions unauthorized by the company's management. The appeal was disposed of accordingly.