2009 (5) TMI 104 - AT - Central Excise

Imposition of equal amount of penalty Under Section 11AC - Credit availment on common inputs used in dutiable and exempted goods separate record and separate inventory not maintained appellant have not even disputed their liability to pay an amount equal to 8% of the value of the exempted finished products at the time of their clearances. It is only imposition of penalty under Section 11AC - Neither Explanation-II to Rule 6(3) refers to Rule 13 for imposition of penalty if the manufacturer does not pay the amount due under this sub-rule nor Rule 13 provides for penalty in this regard. In view of these circumstances, following the Tribunal s judgment in the case of CCE v. Sangrur Agro Ltd., I hold that no penalty is imposable on the Appellant under Section 11AC

Summary

Issues:
1. Duty demand on clearances of PVC tubing for captive consumption.
2. Demand of amount under Rule 6(3)(b) of Cenvat Credit Rules for clearances of exempted goods.
3. Imposition of penalty under Section 11AC of Central Excise Act.

Analysis:
1. The case involved a duty demand of Rs. 10,64,218 on clearances of PVC tubing for captive consumption and a demand of Rs. 90,370 under Rule 6(3)(b) of Cenvat Credit Rules for clearances of exempted goods. The Addl. Commissioner dropped the duty demand for captive consumption but confirmed the demand for exempted goods and imposed a penalty of Rs. 90,370 on the appellant. The Commissioner (Appeals) upheld this decision. However, the Tribunal reduced the penalty to Rs. 25,000, stating that the amount due had been paid before the show cause notice (SCN) issuance. The High Court remanded the matter back to the Tribunal for reconsideration of the penalty reduction in light of legal provisions.

2. The appellant argued that they had not taken Cenvat credit for inputs used in manufacturing exempted goods, hence no amount was payable under Rule 6(3)(b). The Department contended that as the appellant had not maintained separate records for inputs used in dutiable and exempted products, they were liable to pay 8% of the value of exempted products. The Department also argued that the penalty under Section 11AC was justified due to suppression of information. The Tribunal found that the appellant had not disputed their liability to pay the amount under Rule 6(3)(b) but questioned the imposition of penalty under Section 11AC. Referring to a previous case, the Tribunal held that Section 11AC did not apply to non-payment under Rule 6(3)(b) and set aside the penalty.

3. The Tribunal concluded that no penalty was imposable under Section 11AC for non-payment under Rule 6(3)(b) of Cenvat Credit Rules. The Tribunal's decision was based on the interpretation of relevant legal provisions and previous judgments. Consequently, the impugned order upholding the penalty was set aside, and the appeal was allowed. The judgment was pronounced on 13-5-09.