2017 (6) TMI 682 - HC - Central Excise

Imposition of penalty - excess credit taken on capital goods - whether the Tribunal could have reversed its view, based on an application for rectification, moved by the Revenue, under Section 35 C (2) of the CE Act? - Held that - Tribunal will have to rule on and have to come to a definitive conclusion, whether or not, the case falls in the realm of a mistake, as contended by the Assessee or is it a case of deliberate and conscious act of deception and/or wrong doing - appeal allowed by way of remand.

Summary

Issues:
Statutory appeal against order of Customs, Excise and Service Tax Appellate Tribunal; Imposition of penalty under Section 11AC of Central Excise Act, 1944; Rectification application under Section 35 C (2) of Central Excise Act, 1942; Interpretation of judgments by Punjab and Haryana High Court and Supreme Court; Mistake vs. deliberate deception in taking excess cenvat credit.

Analysis:
The Assessee appealed against the Tribunal's order imposing a penalty for taking excess credit on capital goods. The Adjudicating Authority confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals). The Tribunal initially allowed the Assessee's appeal, citing a judgment by the Punjab and Haryana High Court. However, upon a rectification application by the Revenue, the Tribunal reversed its decision based on a Supreme Court judgment. The Assessee challenged the imposition of penalty, arguing it was due to a mistake, not deliberate deception.

The Court noted the lack of discussion on the penalty issue in the Tribunal's order. It highlighted discrepancies in the Assessee's credit claims, indicating potential mistakes in recording. The Court emphasized the need for the Tribunal to determine whether the Assessee's actions constituted a mistake or deliberate wrongdoing, considering relevant legal provisions and judgments. The Court set aside the Tribunal's order and remanded the case for a fresh hearing, directing the Tribunal to consider all aspects and judgments discussed.

The Court referenced the Supreme Court's criteria for rectification applications under Section 35 C (2) of the Central Excise Act, emphasizing the need for obvious mistakes, not debatable points. It also mentioned the importance of the Tribunal as the final fact-finding authority in ruling on penalty imposition. The Court highlighted the Assessee's argument regarding the mistake in taking excess credit and the need for a thorough examination by the Tribunal. The judgment favored the Assessee, leading to the remand of the case for further consideration on the penalty issue.