2016 (4) TMI 235 - AT - Central Excise

Imposition of penalty - Rule 15 (1) of CCR 2004 - Availed Cenvat credit on inputs and service tax paid on input service for the liability of excisable goods - Disallowance of Cenvat credit availed and duty demanded alongwith interest - Appellant submitted that keeping in view the smallness of the disputed duty amount, the penalty of ₹ 10,000/- is too harsh and there is no justification for the same - Held that - since the dispute involves interpretation of legal provisions and the amount of duty sustained not being significant and in view of the submissions of the learned counsel that they are no more pressing against the demand and have also reversed the Cenvat credit availed, there is no justification for imposition of penalty. Accordingly, penalty under rule 15 (1) of CCR 2004 is set aside. - Decided in favour of appellant

Summary

Issues:
1. Disallowance of cenvat credit on service tax paid on insurance policies.
2. Imposition of penalty under Rule 15(1) of Cenvat Credit Rules, 2004.

Analysis:
1. The case involved the disallowance of cenvat credit availed by the appellants on service tax paid on various insurance policies during April 2011 to August 2011. The adjudicating authority disallowed the credit and demanded the amount along with interest and imposed a penalty under Rule 15(1) of Cenvat Credit Rules, 2004. On appeal, the Commissioner (Appeals) allowed credit on three policies but upheld the demand for the remaining two policies. The penalty was reduced to ?10,000. The Commissioner's order specified the policies on which credit was allowed and disallowed, and directed the calculation of amounts by the Central Excise Officer for the material period.

2. The appellants challenged the Commissioner's decision before the Tribunal. The counsel for the appellants conceded to the small disputed amount and did not press on merits against the demand. However, they argued that the penalty of ?10,000 was excessive considering the small amount in dispute. The disputed amount had already been reversed. After hearing both sides and reviewing the records, the Tribunal noted that the Commissioner had set aside a significant portion of the demand, leaving only a minor amount sustained. Given the interpretation of legal provisions and the appellants' reversal of the cenvat credit, the Tribunal found no justification for the imposition of a penalty. Consequently, the penalty under Rule 15(1) of Cenvat Credit Rules, 2004 was set aside, and the appeal was allowed in favor of the appellants.