2016 (8) TMI 442 - AT - Central Excise

Imposition of penalty on partner - wrong availment of Cenvat credit by partnership firm - steel scrap received by the partnership firm is not capable of being used for re-rolling purpose - partnership firm have without contesting the matter, reversed the entire Cenvat Credit and did not litigate the matter. Held that - it is found that the present appellant has shown his ignorance about the nature of the product. From the statement it is revealed that though he has not admitted regarding the nature of the goods but when the question was put up before him regarding the statements of various dealers. He has admitted that they are not verifying documentary evidences which show that whether the waste and scrap received by them is re-rollable scrap. The appellant could not give satisfactory reply to the facts of the nature of the input on which they have taken the credit. Accordingly, as per the thickness of the material the same is not capable of being used in the manufacture of the final product, it is also fact that the partnership firm of the appellant admittedly paid the entire amount of Cenvat Credit and have not contested. Therefore, the penalty of ₹ 2 lakhs imposed on the appellant is on higher side and be reduced to ₹ 50,000/-. - Decided partly in favour of appellant

Summary

Issues:
1. Wrong availment of Cenvat credit by a partnership firm.
2. Imposition of penalty on a partner of the firm for the firm's actions.
3. Dispute regarding the nature of the material received by the firm for re-rolling purposes.

Analysis:
1. The appeal challenged the Order-in-Appeal rejecting the appellant's appeal against the imposition of penalty for wrongly availing Cenvat credit. The appellant, a partner in the partnership firm, received steel scrap and availed Cenvat credit on it. The appellant's statement confirmed the receipt of waste and scrap from dealers, but he claimed ignorance about the specific nature of the material received. The firm reversed the Cenvat credit initially under protest, which was later withdrawn. The appellant was penalized under Rule 26 of the Central Excise Rules. The Commissioner (Appeals) upheld the penalty, leading to the current appeal.

2. The appellant's counsel argued that since the firm had already reversed the Cenvat credit and not contested the matter further, imposing a penalty on the partner was unjustified. He cited a judgment of the Bombay High Court in support of this argument. On the contrary, the revenue contended that the appellant, being aware of the nature of the goods, should also be personally penalized for his role in the wrongful availment of credit. The revenue relied on various judgments to support their stance.

3. After considering both sides' submissions and the records, the tribunal noted that the partnership firm had paid the amount of wrongly availed Cenvat credit after investigation. The issue revolved around the nature of the waste and scrap received by the firm for re-rolling, with allegations that it was not suitable for the intended purpose. The appellant claimed ignorance about the material's nature and failed to provide satisfactory explanations regarding the input material's suitability for re-rolling. Despite the firm's payment and non-contestation, the tribunal found the penalty imposed on the appellant excessive. Consequently, the tribunal reduced the penalty from Rs. 2,00,000 to Rs. 50,000, partially allowing the appeal on this ground.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal precedents cited, and the tribunal's decision and reasoning, providing a detailed overview of the case.