2016 (2) TMI 68 - AT - Central Excise

Equal penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Held that - There is no allegation regarding fraud, wilful misstatement, suppression of fact which are required as per Rule 15(2) read with Section 11AC of the Central Excise Act to impose equal amount of penalty. Moreover, once the learned Commissioner (Appeals) has dropped the interest on the ground that the cenvat credit was availed but not utilized by the appellant and, therefore, by relying upon the judgment of the Hon ble High Court of Punjab & Haryana in the case of Ind-Swift Laboratories Ltd. cited supra, the interest was dropped and once the interest part was dropped by the Commissioner (Appeals) and there are no allegations of suppression and no categorical finding on the requirement of Section 11AC, then in my considered opinion, the imposition of penalty by the respondent is wrong and illegal. Therefore, set aside impugned order and allow the appeal. - Decided in favour of assessee

Summary

Issues:
1. Admissibility of service tax credit on reverse charge basis
2. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act

Analysis:

Admissibility of service tax credit on reverse charge basis:
The case involved a dispute where the appellant, engaged in manufacturing iron and steel products, exported goods to foreign countries after bearing transportation costs and claiming cenvat credit on reverse charge basis. The appellant faced objection during a service tax department audit for allegedly wrongly availing credit under Section 66A of the Finance Act, 1994. The dispute centered around the admissibility of service tax credit paid to a foreign entity. The appellant appealed against the penalty imposed by the order-in-appeal, focusing on Rule 15(2) of the Cenvat Credit Rules and Section 11AC of the Central Excise Act. The appellant's counsel argued that the order lacked specificity on Section 11AC's ingredients and cited relevant case law to support the contention that penalty imposition requires clear evidence of fraud or suppression of facts to evade duty payment.

Imposition of penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act:
The appellant contested the penalty imposed by the Commissioner (Appeals) under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act. The appellant's counsel highlighted the absence of allegations related to fraud, wilful misstatement, or suppression of facts in the show cause notice and subsequent orders. The counsel argued that the lack of specific allegations precluded the imposition of an equal penalty. The Tribunal agreed with the appellant's arguments, emphasizing that the absence of clear findings on Section 11AC's requirements and the dropping of interest by the Commissioner (Appeals) due to non-utilization of cenvat credit indicated an incorrect penalty imposition. Citing the judgment of the Hon'ble High Court of Punjab & Haryana, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal.

This detailed analysis of the judgment addresses the issues of admissibility of service tax credit on reverse charge basis and the imposition of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act, providing a comprehensive overview of the legal reasoning and outcomes of the case.