2017 (5) TMI 1333 - AT - Central Excise

Penalty - Benefit of N/N. 32/99-CE dated 08.07.1999 - CENVAT credit - mis-declaration of place of removal of goods - Held that - Sub-rule (2) of Rule 26 was inserted by Notification No.08/2007-CE(T) dated 01.03.2007 whereas the clearances involved are for the period from 11.06.2003 to 31.05.2005 and the provisions of said Sub-rule (2) which come into operation on 01.03.2007 were not applicable to the clearances made before 01.03.2007 - penalty not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Imposition of penalty under Rule 26 of Central Excise Rules, 2002 based on show cause notices.
- Applicability of penalty provisions to clearances made before 01.03.2007.
- Appeal based on a similar case decided by a Division Bench.

Analysis:
1. The appeals were against an Order-in-original passed by the Commissioner of Central Excise & Customs, Allahabad, regarding the imposition of penalties under Rule 26 of Central Excise Rules, 2002. The appellants, manufacturers of Calcined Petroleum Coke, were availing benefits under Notification No.32/99-CE dated 08.07.1999. The issue arose when it was alleged that the appellants had increased the assessable value of goods, resulting in higher Cenvat credit being passed on to another entity. Show cause notices were issued to the appellants and the receiving entity for recovery of excess Cenvat credit and imposition of penalties.

2. The Tribunal considered the applicability of the penalty provisions under Rule 26 of Central Excise Rules, 2002, specifically clause (ii) of Sub-rule (2). It was noted that Sub-rule (2) of Rule 26 was inserted by Notification No.08/2007-CE(T) dated 01.03.2007, while the clearances in question were made before this date, ranging from 11.06.2003 to 31.05.2005. Therefore, the Tribunal held that the imposition of penalties based on provisions that came into operation after the clearances were not sustainable.

3. The appellants relied on a Division Bench decision involving a similar case to argue for the allowance of their appeals. The Division Bench had ruled in favor of the assessee, stating that the entity receiving the goods was entitled to the credit of duty paid by the input supplier. The appellants contended that since the appeal of the receiving entity was allowed, their appeals should also be allowed.

4. After hearing the arguments from both sides, the Tribunal concluded that the penalties imposed under Rule 26 of Central Excise Rules, 2002 were not valid due to the inapplicability of the penalty provisions to clearances made before 01.03.2007. Consequently, the Tribunal allowed both appeals filed by the appellants, granting them entitlement to any consequential relief as per the law.

In conclusion, the Tribunal set aside the penalties imposed on the appellants, emphasizing the importance of aligning penalty provisions with the relevant timeline of clearances to ensure the legality and validity of such penalties.