2015 (11) TMI 517 - AT - Central Excise

Penalty u/s 11AC - Non reversal of CENVAT Credit - Held that - No allegation has been made out bringing out the facts of suppression, mis-declaration etc. On the contrary, it is acknowledged that soon after the mistakes were pointed out, the appellant had voluntarily discharged the deficit amount along with interest. - mere payment of amount outstanding dues, would not absolve the appellant from imposition of penalty but failed to discuss the circumstances under which the appellant could be said to have suppressed the facts warranting imposition of penalty under Section 11AC of CEA,1944 and Rule 15 of CCR,2004. The Ld. Commissioner(Appeals) observation that had the department not pointed out the discrepancy the deficit amount would not have been paid, is an inference not supported by allegation in the notice nor any evidence leading to the conclusion that the Appellant had suppressed the facts. In these circumstances, penalty imposed under Section 11AC of the Central Excise Act read with Rule 15 of CCR,2004 is unsustainable. Consequently, the impugned Order-in-Appeal is set aside - Decide din favour of assessee.

Summary

Issues:
Imposition of penalty under Section 11AC of CEA,1944 without contesting duty and interest before the Ld. Commissioner (Appeals) and challenging penalty only.

Analysis:
The appeal was filed against Order-in-Appeal No.37/Kol-VII/2011 dated-22/02/2011, where the Ld. Commissioner (Appeals) confirmed the penalty under Section 11AC of CEA,1944. The appellant did not contest the duty and interest before the Ld. Commissioner (Appeals) and only challenged the penalty. The Ld. Consultant argued that they challenged the impugned order on both merits and against the penalty. The Revenue opposed this, stating that since the appellant did not dispute the case on merit before the Ld. Commissioner (Appeals), they cannot raise the issue before the appellate forum. The record of the personal hearing before the Ld. Commissioner (Appeals) revealed that the appellant did not contest the appeal on merit but only contested the imposition of penalty. Therefore, challenging the demand and interest at this stage was deemed impermissible.

On the issue of penalty, the appellant mistakenly availed CENVAT Credit on dutiable and exempted inputs, resulting in non-reversal of CENVAT Credit when opting out of the MODVAT Scheme. The appellant paid the outstanding amount along with interest upon realizing the mistake. The appellant argued that the penalty under Section 11AC of CEA,1944 was unwarranted due to the voluntary payment after the mistake was pointed out. The Revenue reiterated the findings of the Ld. Commissioner (Appeals). The appellate tribunal found that the appellant rectified the mistake by paying the outstanding amount upon notification by the Department, without any evidence of suppression or misdeclaration. The tribunal concluded that the penalty imposed was unsustainable as there was no evidence of suppression of facts warranting the penalty. The impugned Order-in-Appeal was set aside to the extent of confirming the penalty, and the appeal was disposed of accordingly.