2017 (9) TMI 1117 - AT - Central Excise

Reduction of penalty imposed under Rule 15 of Cenvat Credit Rules, 2004 - CENVAT credit on inputs denied - Held that - the maximum penalty can be imposed equivalent to the duty but minimum penalty is discretion of the adjudicating authority - In the facts and circumstances of this case, the penalty imposed on the appellant equivalent to duty is on higher side - penalty reduced to ₹ 50,000/- - appeal allowed - decided n favor of appellant.

Summary

Issues:
Reduction of penalty imposed under Rule 15 of Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Reduction of Penalty

The appellant appealed against the impugned order seeking a reduction in the penalty imposed under Rule 15 of Cenvat Credit Rules, 2004. The appellant, engaged in the manufacture of distribution boards, availed Cenvat credit for inputs and capital goods used in the manufacturing process. However, the appellant supplied electrical panels without duty payment to a specific entity under a government incentive scheme. Consequently, the appellant was not entitled to avail Cenvat credit on the inputs used for these panels. As a result, duty was demanded along with interest and a penalty under Rule 15 was imposed. The appellant contended that the penalty was excessive, citing a previous tribunal case where it was held that the penalty amount should not exceed the duty determined. The appellant requested a reduction in the penalty amount, which was deemed excessive in this case.

Issue 2: Legal Interpretation of Rule 15

Rule 15 of the Cenvat Credit Rules, 2004, states that if a person wrongly utilizes Cenvat credit, the penalty imposed should not exceed the duty amount or two thousand rupees, whichever is greater. The tribunal referred to a previous case where it was clarified that the amount mentioned in the rule is the maximum penalty that can be imposed and not the minimum. The adjudicating authority has the discretion to determine the penalty amount, taking into account relevant factors. In this case, the tribunal found that the penalty imposed on the appellant was excessive as it equaled the duty amount. Therefore, the tribunal exercised its discretion and reduced the penalty to ?50,000, considering the circumstances of the case.

Final Decision

After considering the arguments from both sides and the legal provisions, the tribunal reduced the penalty imposed on the appellant under Rule 15 of the Cenvat Credit Rules, 2004, to ?50,000. The appeal was disposed of based on this decision.

This comprehensive analysis highlights the key legal issues involved in the judgment and the tribunal's decision regarding the reduction of the penalty imposed on the appellant.