2018 (3) TMI 1108 - AT - Central Excise

Penalty u/r 15(2) of CCR 2004 - Held that - The ingredients of rule 15(2), that are clearly enumerated therein implies that penalty is liable to be imposed only in those conditions and none other - It is clear that rule 6(3) does not envisage a change in the method of compliance during the financial year. When the act of the appellant is not recognised in law, there is no ground for alleging non-disclosure of that fact of change is suppression - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Utilization of CENVAT credit for clearances of exempted goods
2. Liability of the appellant for availing CENVAT credit during 2008-09
3. Penalty imposed on the appellant under rule 15(2) of CENVAT Credit Rules, 2004

Issue 1: Utilization of CENVAT credit for clearances of exempted goods
The appeal concerns the utilization of CENVAT credit for clearances of exempted goods, where inputs/input services were procured for manufacturing excisable goods. The impugned order upheld a liability of &8377; 32,91,693/-, interest, and penalty under rule 15(2) of CENVAT Credit Rules, 2004. The appellant reversed 10% for 18 clearances and proportionate credit for inputs in seven clearances. However, changing the option within the same financial year is not permitted under rule 6(3) of CENVAT Credit Rules, 2004. The appellant reversed the CENVAT credit upon notification, and the current appeal focuses on the penalty imposed.

Issue 2: Liability of the appellant for availing CENVAT credit during 2008-09
The appellant argued that rule 15(2) of CENVAT Credit Rules, 2004 does not apply as there was no fraud, collusion, misstatement, or intent to evade duty. The change in reversal practice during the year was reported in returns, bringing it to the department's notice. The original authority found the declaration in ER-1 insufficient, but the tax officer's diligence prevented oversight. Rule 6(3) prohibits changes in compliance methods within a financial year. As the appellant's actions were not legally recognized, there is no basis for alleging non-disclosure or suppression.

Issue 3: Penalty imposed on the appellant under rule 15(2) of CENVAT Credit Rules, 2004
The tribunal noted that rule 15(2) allows penalties only under specific conditions, which were not met in this case. The lower authorities failed to justify invoking rule 15(2) for penalties. Consequently, the impugned order was set aside regarding the penalty imposition. The tribunal's decision emphasizes the necessity for clear justification before imposing penalties under rule 15(2) of the CENVAT Credit Rules, 2004.

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