2017 (8) TMI 764 - AT - Central Excise

100% EOU - proceedings against appellant as well as on his partner - C.B.E. & C. Circular No. 11/2016-Cus., dated 15-3-2016 - co-noticee in the context of Section 28 of the Customs Act, 1962 - Held that - The circular clarified that when the noticee pays up the entire duty, interest and penalty, under such circumstances the proceedings shall be considered as closed not only against the noticee but also against the other persons to whom any demand of duty is envisaged but on whom penalty might have been imposed. Since Section 11A under which the present notice has been issued is pari materia to Section 28 of the Customs Act, similar benefit would be extendable to the appellant and partner - the proceedings are to be deemed concluded not only against the appellant but also against the partner of the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Cenvat credit availed by the appellant.
2. Penalty imposed on the partner.
3. Interpretation of relevant circular regarding co-noticee.

Analysis:
1. The appellant, a 100% EOU engaged in manufacturing welding accessories, availed Cenvat credit which was disputed by the Revenue. The dispute arose from the nature of inputs indicated in the invoices for which the Cenvat credit was claimed. A show cause notice was issued for the reversal of Cenvat credit amounting to ?24,26,336. The Original Authority confirmed this along with interest and penalty under Section 11AC. Additionally, a penalty of ?20 lakhs was imposed on the partner under Rule 26 of Cenvat Credit Rules, 2002. Appeals were filed challenging the order-in-original, leading to the Commissioner (Appeals) reducing the penalty on the partner to ?5 lakhs and extending the benefit of penalty at a reduced level of 25% since the appellant had already paid the entire liability along with interest and 25% penalty.

2. The only plea made by the appellant's counsel was to set aside the penalty imposed on the partner. It was argued that since the duty, interest, and 25% penalty were paid within one month from the issuance of the show cause notice, it should be deemed that the proceedings were concluded. Reference was made to a C.B.E. & C. Circular which clarified the treatment of co-noticees in similar situations under the Customs Act, 1962. The Circular stated that when the noticee pays the entire duty, interest, and penalty, the proceedings would be considered closed not only against the noticee but also against other persons on whom a penalty might have been imposed. Drawing parallels between Section 11A and Section 28 of the Customs Act, it was argued that the same benefit should be extended to the appellant and the partner.

3. After considering the arguments and the relevant Circular, the Tribunal upheld the impugned order but modified it to waive the penalty imposed on the partner. The Tribunal concluded that the proceedings should be deemed concluded not only against the appellant but also against the partner. As a result, both appeals were disposed of with the penalty on the partner being waived.