2016 (6) TMI 607 - AT - Central Excise

Penalty imposed under Rule 15(2) of Cenvat Credit Rules - suppression of fact or fraud - whether the Commissioner (Appeals) has no power to remand? - Held that - The Commissioner (Appeals) has not remanded the matter. The Commissioner (Appeals) upheld the recovery of credit availed and used for civil construction and machinery support structures and directed the jurisdictional Divisional Officer to quantify the demand. In fact there is no order of remand for adjudication of an issue passed by the Commissioner (Appeals). Therefore, the first ground raised by Revenue fails. In the Order-in-Original the original authority has observed that the respondent availed credit by suppressing the fact of utilisation of items and details of manufacture. The credit was availed as inputs. It is not disputed that the respondent has disclosed the credit availed in ER-1 returns and the Cenvat credit statement filed by them. In fact, the show cause notice is issued on the basis of these ER-1 returns and furnishing of informations by the respondent. There is no case for revenue that any hidden information was received by inspection or search. So the conclusion of the Commissioner (Appeals) that the facts of the case do not pose a situated for imposing penalty, does not call for any interference.

Summary

Issues:
Challenge to penalty under Rule 15(2) of Cenvat Credit Rules based on irregular availment of credit on certain items as inputs.

Analysis:
The appeal was filed by the Revenue challenging the Commissioner (Appeals) order that set aside the penalty imposed under Rule 15(2) of Cenvat Credit Rules. The respondent, engaged in manufacturing various concentrates, availed Cenvat credit on duty paid inputs and capital goods. A show cause notice alleged irregular credit availment on certain items. The respondent defended, citing the non-applicability of an amendment to Rule 2(k) of Cenvat Credit Rules inserted in 2009. They argued that the credit availed was legitimate under Rule 3 of the Cenvat Credit Rules. The original authority allowed some credit but disallowed a significant amount, imposing an equal penalty. The Commissioner (Appeals) upheld the credit recovery but set aside the penalty, leading to this appeal by the Revenue.

The Revenue raised two grounds in the appeal. Firstly, they contended that the Commissioner (Appeals) lacked the power to remand the matter. However, the Commissioner (Appeals) did not remand but directed the Divisional Officer to quantify the demand, maintaining the decision on credit recovery. Therefore, the first ground of the Revenue's appeal was deemed baseless. Secondly, the Revenue argued that the Commissioner (Appeals) erred in setting aside the penalty. The original authority had alleged suppression of facts by the respondent, but the Commissioner (Appeals) found no basis for penalty imposition, as the credit availed was disclosed in the ER-1 returns and Cenvat credit statements. There was no evidence of hidden information, inspection, or search leading to the penalty. Thus, the Commissioner (Appeals) decision on penalty was upheld, and the appeal was dismissed.

In conclusion, the judgment upheld the Commissioner (Appeals) decision to set aside the penalty imposed under Rule 15(2) of Cenvat Credit Rules, based on the lack of evidence supporting the imposition of the penalty due to the disclosure of credit availed by the respondent in their official returns and statements.