2015 (8) TMI 439 - SC - Central Excise

Validity of High Court s order - Penalty u/s 11AC - CIT confirmed duty - Tribunal deleted duty and penalty - Whether Customs Excise & Service Tax Appellate Tribunal committed an error in fact and in law in reversing the order of CIT(Appeals) confirming the demand for wrongfully availed Cenvat credit on the ground that the issue is revenue neutral - Held that - High Court 2014 (7) TMI 780 - GUJARAT HIGH COURT has accepted one substantial question of law out of two substantial questions of law as proposed by the revenue. - second substantial question of law, as proposed by the revenue, deserves to be framed and, accordingly, the finding recorded by the High Court is set aside and it is directed that the second question of law shall form a part of the order dated 1 st May, 2013, and be dealt with accordingly. - Decided in favour of Revenue.

Summary

Issues:
Legal validity of the order passed by the Division Bench of the High Court of Gujarat at Ahmedabad regarding penalty under Section 11 AC of the Central Excise Act, 1944.

Analysis:
The Supreme Court granted special leave to hear the appeal challenging the order dated 1st May, 2013, passed by the Division Bench of the High Court of Gujarat at Ahmedabad. The High Court had accepted one substantial question of law proposed by the revenue out of two. The second question of law pertained to the penalty imposed on the assessee under Section 11 AC of the Central Excise Act, 1944 for taking inadmissible Cenvat Credit of Service Tax and using it for payment of Central Excise Duty. The High Court, however, did not find any evidence of fraud, collusion, willful misstatement, suppression of facts, or contravention of the provisions of the Act or rules by the assessee with the intent to evade payment of duty. The Supreme Court disagreed with the High Court's finding and held that the second substantial question of law deserved consideration. Therefore, the Supreme Court set aside the High Court's decision and directed that the second question of law be included in the order for further consideration.

This judgment primarily revolves around the interpretation and application of Section 11 AC of the Central Excise Act, 1944 concerning the imposition of penalties on the assessee for utilizing inadmissible Cenvat Credit of Service Tax for payment of Central Excise Duty. The key issue was whether the assessee had willfully misstated facts or suppressed information to evade duty payment. The High Court found no evidence of such misconduct, but the Supreme Court disagreed and directed the consideration of the second substantial question of law raised by the revenue. The decision underscores the importance of ensuring compliance with tax laws and the consequences of any willful misstatement or suppression of facts in tax matters.

In conclusion, the Supreme Court's judgment in this case highlights the significance of upholding the provisions of tax laws, particularly in cases involving the misuse of credit for duty payments. The decision emphasizes the need for a thorough examination of facts and adherence to legal requirements to prevent any evasion of duty. The ruling serves as a reminder of the consequences that may arise from non-compliance with tax regulations and the importance of ensuring transparency and accuracy in financial transactions to avoid penalties and legal repercussions.