2016 (8) TMI 1023 - AT - Central Excise

Imposition of penalty - non-filing of Annual Return containing details of inputs for the period 2004-05 - Rule 15 of the Cenvat Credit Rules, 2004 - manufacture of Pan Masala - Held that - it is clear that both the lower authorities have seriously erred in applying the legal provisions relevant to the case. Non-filing of Annual Return, as stipulated in Rule 9 of Cenvat Credit Rules, 2004, cannot be penalized in terms of Rule 15 of the said Rules as it is only a procedural violation. It is seen that other than the non-filing of return, no other allegation has been made against the appellant. The returns stand filed thereafter. Therefore, both the lower authorities have fallen in error in not considering the correct legal position and imposing penalty based on in-applicable legal provisions. - Decided in favour of appellant

Summary

Issues: Imposition of penalty under Cenvat Credit Rules, 2004 for non-filing of Annual Return.

The judgment pertains to an appeal against the imposition of a penalty on the appellants by the Commissioner (Appeals) for not filing the Annual Return as required under Rule 9 of the Cenvat Credit Rules, 2004. The Original Authority had imposed a penalty of ?1 crore, which was later reduced to ?5,00,000 by the Commissioner (Appeals). The appellant challenged this penalty, arguing that the penalty was wrongly imposed under Rule 15 of the Cenvat Credit Rules, 2004, instead of Rule 9. The Tribunal found that the penalty under Rule 15 was not applicable for non-filing of the Annual Return, as it was a procedural violation and the return was filed later. The Tribunal held that Rule 9(A) does not provide for penal provisions, and Rule 15 does not cover the present proceedings. The lower authorities erred in not considering the correct legal position and imposing the penalty based on inapplicable legal provisions. Therefore, the impugned order was set aside, and the appeal was allowed.

In this case, the key issue was the imposition of a penalty under the Cenvat Credit Rules, 2004 for the non-filing of the Annual Return by the appellants. The Tribunal found that the penalty imposed by the Original Authority and later reduced by the Commissioner (Appeals) was erroneous as it was based on Rule 15, which was not applicable to the situation at hand. The Tribunal emphasized that the contravention for not filing the return was a procedural violation, and Rule 9(A) did not include penal provisions for such non-compliance. Additionally, the Tribunal noted that in a previous similar case involving the same appellant, it was held that the penalty for non-filing of the return was not justified. The Tribunal concluded that the lower authorities had incorrectly applied the legal provisions and imposed the penalty, leading to the setting aside of the impugned order and allowing the appeal.

The judgment highlighted the incorrect application of legal provisions by the lower authorities in imposing a penalty on the appellants for not filing the Annual Return as required under Rule 9 of the Cenvat Credit Rules, 2004. The Tribunal observed that the penalty under Rule 15 was not appropriate for a procedural violation like non-filing of the return, as Rule 9(A) did not include penal provisions for such non-compliance. The Tribunal also referenced a previous case involving the same appellant where a similar penalty was challenged and deemed unjustified. By setting aside the impugned order and allowing the appeal, the Tribunal emphasized the importance of correctly applying the relevant legal provisions in penalty proceedings to ensure fairness and adherence to procedural requirements.