2016 (4) TMI 20 - AT - Central Excise

Quantum of penalty - demand of an amount @8% under Rule 6 of the Cenvat Credit Rules with respect to liquid nitrogen used in the manufacture of dutiable and exempted finished products - Held that - As per Rule 12 of the Cenvat Credit Rules, 2002, recovery machinery for taking improper credit existed in Cenvat Credit Rules, 2002. The Appellant was further well aware of paying 8% of the amount under Rule 6 of the Cenvat Credit Rules when common inputs are used in the manufacture of dutiable and exempted finished products and where no separate accounts are maintained. The Appellant also did not pay the disputed amount immediately on being pointed out by the department. The amounts paid by the Appellant were as a result of Stay order dated 29.01.2010 passed by the First Appellate Authority as mentioned in paragraph-4 of the Order-in-Appeal dated 20.06.2012. However, there is substance in the argument made by the Appellant that all the relevant details with respect to dutiable and exempted goods were mentioned in the periodical returns filed with the department. On perusal of the records and in the interest of justice this Bench is of the view that a penalty of ₹ 20,000/- under Rule 13(1) of the Cenvat Credit Rules, 2002 will meet the ends of justice. Accordingly penalty imposed upon the Appellant by the Adjudicating Authority under Order-in-Original is reduced to ₹ 20,000/-

Summary

Issues Involved:
Demand of an amount under Rule 6 of the Cenvat Credit Rules for liquid nitrogen used in manufacturing dutiable and exempted finished products. Contest of equivalent penalty imposition based on case laws.

Analysis:
The Appellant contested the imposition of an equivalent penalty under Rule 13 of the Cenvat Credit Rules, 2002, arguing that the penalty was not justified as all relevant details were disclosed in the periodical returns. The Appellant acknowledged the duty liability and interest but disputed the penalty. The Appellant relied on case laws to support their argument, emphasizing that no recovery machinery was provided under the Cenvat Credit Rules until an amendment in 2005. The Appellant's consultant highlighted that all dutiable and exempted goods were declared in the returns, indicating no intention to commit fraud or misstatement to avail incorrect credit.

The Revenue argued that there was no retrospective amendment in the Cenvat Credit Rules, 2002 and 2004, and that provisions for recovery of credit were already in place. The Revenue pointed out that the Appellant failed to produce separate accounts for common inputs used in manufacturing dutiable and exempted products, despite requests from the department. The Revenue strongly defended the imposition of an equivalent penalty under Rule 13 of the Cenvat Credit Rules, 2002, in conjunction with the Central Excise Act, 1944.

Upon hearing both sides and reviewing the case records, the Tribunal found that the Appellant did not contest the issue on merits but argued against the imposition of an equivalent penalty. The Tribunal noted that recovery machinery existed in the Cenvat Credit Rules, 2002, from the beginning, and no retrospective amendment was made for introducing recovery mechanisms. The Tribunal acknowledged the Appellant's disclosure of relevant details in the returns but emphasized that the Appellant failed to pay the disputed amount promptly and only did so following a Stay order.

In its decision, the Tribunal reduced the penalty imposed on the Appellant to ?20,000 under Rule 13(1) of the Cenvat Credit Rules, 2002, considering the disclosure of relevant details and the interests of justice. The Tribunal allowed the appeal filed by the Appellant to the extent of reducing the penalty to ?20,000, overturning the previous decisions on penalty imposition.