2017 (11) TMI 331 - AT - Central Excise

Penalty u/s 11AC - compliance of provision of Rule 11A(2B) - Held that - there is no dispute that entire amount of demand along with interest had been paid by the respondent before issuance of SCN. Considering the said facts, the Ld. Commissioner(Appeals) waived the penalty invoking provision of Section 11A(2B) - Section 11AC penalty cannot be imposed if the respondent has opted for provision of Section 11A(2B) under which they have admittedly paid entire amount along with interest before issuance of show cause notice. Therefore I do not find any infirmity in the impugned order passed by the Commissioner(Appeals) - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Imposition of penalty under Section 11AC by Revenue.
2. Waiver of penalty under Section 11AC by Commissioner(Appeals) based on compliance with Rule 11A(2B).
3. Dispute regarding reversal of Cenvat credit due to SSI exemption.
4. Applicability of Section 11A(2B) in waiving penalty under Section 11AC.

Analysis:
1. The Revenue filed an appeal seeking the imposition of penalty under Section 11AC, which was dropped by the Commissioner(Appeals) based on compliance with Rule 11A(2B). The Revenue argued that since the demand for the longer period was confirmed, the penalty under Section 11AC was inevitable, citing the Supreme Court case in Union of India Vs. Dharamendra Textile Processors [2008(231) ELT 3].

2. The Respondent's counsel contended that the issue revolved around the reversal of Cenvat credit due to opting for SSI exemption, initiated by an audit. The Respondent had reversed the Cenvat credit related to stock on the closing day of the financial year. Despite some short reversal pointed out by preventive officers, the amount was promptly reversed with interest before the show cause notice. The Commissioner(Appeals) rightly waived the penalty under Section 11AC invoking provision of Section 11A(2B).

3. Upon careful consideration, it was noted that the entire demanded amount along with interest had been paid by the Respondent before the issuance of the show cause notice. The Commissioner(Appeals) correctly waived the penalty under Section 11AC based on the provisions of Section 11A(2B), as the Respondent had complied with the payment requirements before the notice was served.

4. The Tribunal upheld the decision that the penalty under Section 11AC cannot be imposed if the Respondent has followed the provisions of Section 11A(2B by paying the entire amount along with interest before the show cause notice. The Tribunal found no fault in the Commissioner(Appeals)'s order and dismissed the Revenue's appeal. The Respondent's counsel did not press the ground taken in the cross objection, which was also disposed of accordingly.