2017 (6) TMI 152 - AT - Central Excise

Penalty - reversal of CENVAT credit - Rule 6(3) of the CCR 2004 - it was alleged that the appellants have been clearing the exempted goods to M/s BEML by raising commercial invoices since 21.5.2007 and without maintaining separate accounts as per Rule 6(2) of Cenvat Credit Rules 2004 for receipt, consumption and inventory of inputs meant for use in the manufacture of exempted goods and also not reversed the attributable credit - Section 11AC of the CE Act - Held that - the Division Bench of the Tribunal in the case of Sangrur Agro Ltd 2010 (2) TMI 438 - PUNJAB & HARYANA HIGH COURT has held that the provisions of Section 11AC of the CE Act are applicable only in respect of short- payment of duty whereas the payment under Rule 6(3)(b) of Cenvat Credit Rules is not duty but an amount - the penalty imposed on the appellant is not warranted by law - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal against rejection of appeal by Commissioner (Appeals) and upholding of order-in-original.
2. Allegation of clearing exempted goods without maintaining separate accounts as per Rule 6(2) of Cenvat Credit Rules 2004.
3. Demand of amount, interest, and penalty under Rule 15(2) of CENVAT Credit Rules.
4. Applicability of Rule 6 of CENVAT Credit Rules during the relevant period.
5. Interpretation of Section 11AC of the Central Excise Act in relation to excess amount claimed under Rule 6(3)(b) of Cenvat Credit Rules.
6. Applicability of penalty under Section 11AC and reversal of amount under Rule 6(3)(b) of Cenvat Credit Rules.

Analysis:
1. The appeal was filed against the rejection of the appeal by the Commissioner (Appeals) and upholding of the order-in-original, which confirmed the demand of an amount along with interest and penalty under Rule 15(2) of CENVAT Credit Rules. The appellant had cleared exempted goods without maintaining separate accounts as per Rule 6(2) of Cenvat Credit Rules 2004, leading to the issuance of a show-cause notice proposing a demand. The Assistant Commissioner confirmed the demand, which was upheld by the Commissioner.

2. The appellant argued that the impugned order was unsustainable as it did not consider the provisions of CENVAT Credit rules properly and was against binding judicial precedent. The appellant contended that during the relevant period, the rule in question did not exist, and hence confirming the payment based on non-existent provisions was not legally sustainable. The appellant also highlighted that once the mistake was pointed out by the department, they immediately discharged the tax liability along with interest, which was not appreciated in the impugned order.

3. The Tribunal analyzed the applicability of Section 11AC of the Central Excise Act in relation to the excess amount claimed by the appellant under Rule 6(3)(b) of Cenvat Credit Rules. Citing precedents, the Tribunal held that Section 11AC was applicable only in cases of short payment of duty, whereas the present case dealt with the reversal of an excess amount claimed under Rule 6(3)(b). The Tribunal upheld that Section 11AC was not applicable in the present case, as it related to evasion of duty, not the reversal of an amount under the Cenvat Credit Rules.

4. Relying on previous decisions, the Tribunal concluded that no penalty was imposable on the appellant under Section 11AC, setting aside the penalty imposed and allowing the appeal of the appellant. The Tribunal followed the decisions in cases such as CCE Ludhiana Vs Sangrur Agro Ltd and Eastern Medikit Ltd vs CCE Gurgaon to support its decision in this case.