2016 (9) TMI 364 - AT - Central Excise

Cenvat credit - admissibility - credit took on documents, received from registered dealer without receipt of any inputs - no quantification of inadmissible credit has been done in the show cause notice by making reference to invoices and entries made in RG-23A Part-II - Held that - in the absence of spelling out the allegation clearly in the show cause notice, appellant cannot be expected to explain his case. In view of the statement of partner of M/s. Ram Kumar Kamal Kumar only an amount of ₹ 2,47,844/- of credit is inadmissible to the appellant as admitted. Therefore, Modvat credit of ₹ 2,47,844/- is thus correctly denied to the appellant. Imposition of penalty - Held that - in the light of decisions of the Tribunal in the case of Western India Paints and Colour Co.(P)-vs.- Commr. Of C.Ex., Chennai 2002 (1) TMI 166 - CEGAT, CHENNAI and in the case of Varalakshmi Exports vs.-Commr. Of Cus.(Seaport-Export), Chennai 2013 (12) TMI 1301 - CESTAT CHENNAI that in remand proceedings penalty cannot be enhanced when department did not file any appeal against the first adjudication order where a penalty of ₹ 2.5 lakh was imposed. However, in the interest of justice it is ordered that a penalty of ₹ 1.00 lakh (one lakh) upon the appellant will meet the ends of justice in the present proceedings. Accordingly penalty imposed upon the appellant is reduced to ₹ 1.00 lakh under Rule 173 Q (1) (bb) of the Central Excise Rules, 1944. - Decided against the Revenue

Summary

Issues:
1. Admissibility of credit taken by the appellant.
2. Imposition of penalty on the appellant.

Admissibility of Credit:
The appeal was filed by the appellant against the demand, interest, and penalty imposed by the Adjudicating Authority. The Revenue also filed an appeal against the same Order-in-Original (OIO) on the grounds of inadmissible credit taken by the appellant. The appellant argued that the delay in filing the Revenue's appeal was due to misplacement of documents. The appellant contended that the department alleged that credit was taken without receiving inputs from registered dealers, but only a specific amount was inadmissible based on a partner's statement. The appellant highlighted that no quantification of irregular credit was provided for them to explain. The appellant referred to previous penalty imposition, arguing that penalties cannot be enhanced beyond a certain limit in remand proceedings, citing relevant case laws.

Imposition of Penalty:
The Revenue argued that all documents were returned to the appellant as per a remand order, and thus, the appellant cannot demand copies of invoices and credit entries. The Revenue justified the rejection of credit and imposition of a higher penalty. After hearing both sides, it was observed that the appeals and cross objections were filed after a significant delay, which was not justified. The appellant argued that no proper quantification of inadmissible credit was done in the show cause notice. It was noted that there was no evidence of input shortage in the appellant's stock during the relevant period. The show cause notice lacked clarity in specifying the allegations, leading to confusion for the appellant in presenting their case. Ultimately, a specific amount of credit was deemed inadmissible to the appellant. Regarding penalty imposition, it was acknowledged that penalties cannot be enhanced in remand proceedings if no appeal was filed against the initial penalty. In the interest of justice, the penalty imposed on the appellant was reduced.

In conclusion, the appeal filed by the appellant was allowed to a certain extent, with the inadmissible credit quantified and penalty reduced. The appeal of the Revenue was dismissed. The Miscellaneous Application (MA) and Cross Objection (CO) filed by the appellant were also disposed of accordingly.