2017 (11) TMI 150 - AT - Central Excise

Imposition of penalty - suppression of facts - whether the appellant herein needs to be visited with equivalent that penalty under the provision of Rule 25(2) of the CCR 2004 read with section 11AA of CEA 1994 or otherwise? - Held that - appellant herein having clearly recorded that they had availed Cenvat credit on the various inputs as per the Annexure to the ER-I (undisputed) that it cannot be held that appellant had intension to evade the Central Excise duty in availing such Cenvat credit of the Central Excise duty paid on pipes delivered at the site of the customers - during the period in question, provision of Cenvat credit rules also permitted delivery of duty paid inputs directly at the premises of job worker or at the site and Cenvat credit was allowed of duty paid on such materials - The equivalent penalty imposed on appellant, in such a situation is unwarranted. The equivalent amount of penalty imposed on the appellant is not satisfying the ingredients of section 11AC of CEA 1994 and rules made thereunder, accordingly the impugned order to the extent it has upheld imposition of equivalent penalty of ₹ 13,17,930/- is unsustainable and liable to be set aside - As regards, the penalty of ₹ 6,114/- the said penalty is correctly imposed and there is no reason for setting aside such penalties. Appeal allowed in part.

Summary

Issues involved:
Whether the appellant is liable for an equivalent penalty under Rule 25(2) of the Cenvat Credit Rules 2004 read with section 11AA of Central Excise Act, 1994.

Analysis:
The appeal revolved around the imposition of an equivalent penalty on the appellant for allegedly availing ineligible Cenvat credit and not paying duty on certain cleared items. The tribunal initially remanded the matter to reconsider the penalty imposition issue. The adjudicating authority and the first appellate authority concluded that the appellant had wrongly availed Cenvat credit without receiving the inputs in the factory, indicating suppression of facts to evade duty.

Upon review, it was found that the appellant had disclosed the entire Cenvat credit information, including duty paid on pipes delivered to their premises. The tribunal directed verification of facts regarding Cenvat credit availed and its impact on the suppression of facts allegation. The appellant's declaration of availing Cenvat credit on various inputs, as per ER-I, was undisputed, suggesting no intent to evade duty.

The judicial member opined that the appellant's actions did not demonstrate an intention to evade Central Excise duty, especially considering the permissibility of delivering duty-paid inputs directly to job workers or sites under the Cenvat credit rules. Consequently, the imposition of an equivalent penalty was deemed unwarranted.

The judgment held that the equivalent penalty imposed on the appellant did not meet the requirements of section 11AC of the Central Excise Act, 1994, and related rules. As a result, the order upholding the penalty of Rs. 13,17,930 was set aside. However, the penalty of Rs. 6,114 was upheld as correctly imposed. The appeal was disposed of accordingly.