2018 (2) TMI 1551 - AT - Central Excise

Penalty u/r 15(2) of the CENVAT Credit Rules 2004 - reduction of penalty to 25% as prescribed in the said rule - Held that - CENVAT credit wrongly availed along with the interest thereon had been made good before the adjudication proceedings were completed, thus entitling the assessee to reduced penalty in the order of the original authority - There has been a glaring lapse on the part of the original authority in not recording the option of reduced penalty in the adjudication order. The matter remanded back to the said authority for re-determination of the scope and limit of invoking the penal provisions - Appeal allowed by way of remand.

Summary

Issues:
Reduction of penalty under rule 15(2) of CENVAT Credit Rules 2004 by the first appellate authority without examining the scope of penal provisions in section 11AC of Central Excise Act, 1944.

Analysis:
1. The appeal was filed by the Revenue against the order-in-appeal reducing the penalty under rule 15(2) of the CENVAT Credit Rules 2004. The original authority had imposed a penalty equal to the CENVAT credit allegedly availed without entitlement. The Respondent had taken credit twice against the same documents but repaid the amount along with interest. The issue was whether the first appellate authority had the power to reduce the penalty imposed under section 11AC of the Central Excise Act, 1944. The Appellant argued that the penalty should be equal to the duty evaded, citing relevant judgments.

2. The Appellant relied on the decision of the Hon'ble Supreme Court in Commissioner of Central Excise & Customs v. R A Shaikh Paper Mills Pvt Ltd [2016 (335) ELT 203 (SC)]. The perusal of the relevant rules revealed that the penalty under rule 15(2) of the CENVAT Credit Rules 2004 is applicable when credit is wrongly taken due to fraud, collusion, willful misstatement, or contravention of laws to evade duty. Section 11AC mandates a penalty equal to the duty evaded, with a provision for a reduced penalty of 25% if duty and interest are paid within 30 days. The Authorised Representative argued that the option of reduced penalty should have been availed at the outset.

3. The Counsel contended that the adjudicating authority should have specified the option of reduced penalty, and the absence of such specification obligated the appellant to seek appellate remedy. Referring to the judgment in Commissioner of Central Excise & Customs v. R A Shaikh Paper Mills Pvt Ltd, it was argued that the appellate authority could reduce the penalty even if the option was not exercised initially. The CENVAT credit was rectified before the adjudication was completed, warranting a reduced penalty. The original authority failed to record the option of reduced penalty, leading to the remand of the matter to the appellate authority for a re-determination of the scope and limit of invoking penal provisions under section 11AC of the Central Excise Act, 1944.

4. The first appellate authority reduced the penalty without analyzing the scope of penal provisions in section 11AC. Therefore, the order was set aside, and the matter was remanded back for re-determination. The appellate authority was directed to examine the scope and limit of invoking penal provisions. The case was remanded back for further proceedings.

5. In conclusion, the judgment highlighted the importance of specifying the option of reduced penalty by the adjudicating authority and the need for a thorough examination of penal provisions before reducing penalties. The matter was remanded back to the appellate authority for re-determination of the scope of invoking penal provisions under section 11AC of the Central Excise Act, 1944.