2016 (6) TMI 609 - AT - Central Excise

Non imposition of equal amount of penalty under Section 11 AC - main contention raised by Revenue is that when the demand is confirmed, the penalty should be equal to the demand confirmed - Held that - AR is using the words confirmation of demand and determination of duty interchangeably. We cannot agree to this submission. Section 11 AC uses the word duty as determined . The Commissioner (Appeals) has relied on several judgments while upholding the view taken by adjudicating authority in giving the benefit of adjusting the Cenvat credit. In Aditya Industries Vs. CCE, Hyderabad (2007 (2) TMI 550 - CESTAT, BANGALORE ) the Coordinate Bench of the Tribunal observed that, since the Modvat credit available to the appellants is much more than the duty demanded, no further demand is sustainable. The said demand can be adjusted against the credit claimed by the appellants. Therefore, the penalties on the appellants are not sustainable. - Decided in favour of assessee

Summary

Issues:
1. Imposition of penalty under Section 11 AC of Central Excise Act, 1944.
2. Benefit of Cenvat credit on polyester film used in manufacture of pouches.
3. Dispute regarding penalty amount in relation to duty demand.

Analysis:
1. The appeal pertains to the grievance of Revenue regarding the imposition of penalty under Section 11 AC of the Central Excise Act, 1944. The lower authority had confirmed a demand of ?35,18,547/- along with interest and imposed an equal amount of penalty. The department contended that the penalty should be equal to the demand amount. However, the Commissioner (Appeals) upheld the decision of the original authority in allowing Cenvat credit on the polyester film used in manufacturing pouches, resulting in a lower duty liability and penalty amount.

2. The respondents were issued a show cause notice for undervaluation, alleging a demand of ?35,18,547/-. The original authority confirmed this demand but allowed the benefit of Cenvat credit on the polyester film used in manufacturing pouches, reducing the duty liability to ?5,36,375/-. The department challenged this decision, arguing that the penalty should be equal to the original demand. The Commissioner (Appeals) upheld the allowance of Cenvat credit, leading to a lower penalty amount.

3. The main contention raised by Revenue was that the penalty should be equal to the confirmed demand amount of ?35,18,547/-. The department argued that since the duty liability after adjustment of Cenvat credit was lower, the penalty should match the original demand. However, the Commissioner (Appeals) dismissed the appeal, relying on precedents that support adjusting the penalty based on the duty liability determined after considering Cenvat credit. The Tribunal also cited previous judgments where penalties were not sustained due to available Modvat credit exceeding the duty demanded.

In conclusion, the Tribunal dismissed the appeal filed by Revenue, emphasizing that the penalty under Section 11 AC should be based on the duty liability as determined after considering Cenvat credit. The decision was supported by legal precedents and established principles in similar cases.