2017 (10) TMI 1576 - AT - Central Excise

Scope of SCN - Orders show that the penalty has been imposed under Section 11 AC of the Central Excise Act, 1944 while SCN seeks to impose penalty u/r 15 of the Cenvat Credit Rules, 2004 - HELD THAT - It is on records and undisputed that the appellant herein had issued invoices during the period 2006-2010 in respect of the Customs Duty and the Cesses. The appellant herein is a first stage dealer and can issue the invoice only passing of the Cenvat credit in respect of the duties which can be passed on to purchasers. Since it is undisputed the Custom duty and Cesses which has been passed on by the appellant could not have been done so, there is violation of the provisions of Central Excise Rules, 2002. Though the lower Authorities have imposed penalty under Section 11AC of the Central Excise Act, 1944, the Penal provisions under Rule 26 of the Central Excise Rules, 2002 gets attracted in the case in hand in as much that there is passing of ineligible Cenvat credit by the appellant to their purchasers. Appeal dismissed.

Summary

Issues:
1. Imposition of penalty under Section 11 AC of the Central Excise Act, 1944 versus Rule 15 of the Cenvat Credit Rules, 2004.
2. Violation of provisions of Central Excise Rules, 2002 by passing ineligible Cenvat credit to purchasers.
3. Correctness of penalty imposition under Rule 26 of the Central Excise Rules, 2002.

Analysis:
1. The appeal was against Order-in-Appeal No. 42-16-17 dated 03/05/2016. Despite notice, no one appeared on behalf of the appellant. The matter was disposed of in the absence of representation since it pertained to 2016. The Ld. Departmental representative was heard, and records were examined.

2. The appellant contested the penalty imposition under Section 11 AC of the Central Excise Act, 1944, which was upheld by the First Appellate Authority. It was noted that penalties were imposed for passing ineligible Cenvat credit in violation of the Central Excise Rules, 2002. The appellant, a first stage dealer, issued invoices for Customs Duty and Cesses during 2006-2010, passing on duties without proper credit transfer. This act constituted a violation of the rules.

3. The lower Authorities had imposed penalties under Section 11AC of the Central Excise Act, 1944. However, it was determined that the penal provisions under Rule 26 of the Central Excise Rules, 2002 were more appropriate due to the passing of ineligible Cenvat credit to purchasers. The penalty imposition was deemed correct but should have been under Rule 26 of the Central Excise Rules, 2002. Consequently, the appeal was dismissed, confirming the penalty under the correct provision.

This judgment highlights the importance of adhering to the specific provisions of the Central Excise Rules regarding the imposition of penalties for passing ineligible Cenvat credit. It underscores the need for proper compliance with the rules to avoid penalties and legal repercussions.