2018 (4) TMI 59 - AT - Central Excise

Penalty under Rule 13(2) and Rule 15(2) of Cenvat Credit Rules, 2002/2004 respectively - irregular credit on account of capital goods received from a 100% EOU - difference of opinion - Held that - the difference of opinion is placed before the Hon ble President for reference to third Member for resolving the dispute - Whether the appeal has to be dismissed by upholding the penalty, as held by the Ld. Member Technical, Shri Devender Singh (OR) the same has to be allowed by setting aside the penalty, as held by the Ld. Member Judicial? Matter refereed to Third Member.

Issues Involved:
1. Wrong availment of Cenvat credit on capital goods received from a 100% EOU.
2. Imposition of penalty under Rule 13(2) and Rule 15(2) of the Cenvat Credit Rules, 2002/2004.
3. Allegation of suppression of facts with intent to evade duty.
4. Timeliness of the show cause notice issued by the Department.
5. Relevance of precedents cited by the appellant.

Detailed Analysis:

1. Wrong Availment of Cenvat Credit:
The appellant, a manufacturer of plastic bottles, was found to have availed excess Cenvat credit on capital goods received from a 100% EOU for the periods 2003-04 and 2004-05. The discrepancy was identified during the scrutiny of purchase invoices by the jurisdictional Range Officer. The appellant admitted to the wrong computation of Cenvat credit but contested the penalty imposed.

2. Imposition of Penalty:
The core issue was whether the appellant was liable for a penalty under Rule 13(2) and Rule 15(2) of the Cenvat Credit Rules, 2002/2004. The adjudicating authority confirmed the demand of ?56,33,653/- along with interest and imposed an equivalent penalty. The appellant argued that the wrong computation was not intentional and there was no suppression of facts with the intent to evade duty.

3. Allegation of Suppression of Facts:
The Department contended that the appellant had suppressed facts and only reversed the excess credit after being pointed out by the Range Superintendent. The appellant, however, claimed that they voluntarily reversed the credit upon realizing the mistake. The adjudicating authority concluded that there was suppression of facts, as the reversal of credit occurred only after the Department initiated verification.

4. Timeliness of the Show Cause Notice:
The appellant argued that the show cause notice issued after three years was time-barred and thus invalid. They cited various case laws to support their contention. However, the adjudicating authority held that the show cause notice was issued within the permissible period of five years from the date of knowledge of the irregularity, as per the Supreme Court's decision in the case of Mehta & Co.

5. Relevance of Precedents:
The appellant cited several precedents to argue against the imposition of penalties, including cases like Uniworth Textiles Limited, Florida Electricals Ltd., JSL Industries Ltd., Emco Ltd., and Gammon India Ltd. The adjudicating authority distinguished these cases based on their facts and held that they were not applicable to the present case.

Separate Judgments:

Majority Opinion:
The majority upheld the penalty, concluding that the appellant had suppressed facts with the intent to evade duty. The reversal of excess credit was prompted by the Department's verification, and the show cause notice was issued within the statutory period. The penalty was deemed appropriate given the circumstances.

Dissenting Opinion:
The dissenting judge opined that the wrong computation of Cenvat credit was not due to any malafide intention. The appellant had voluntarily reversed the excess credit and informed the Department. The delay in issuing the show cause notice was also highlighted, arguing that the penalty was not justified. The dissenting judge recommended setting aside the penalty.

Conclusion:
The case was referred to the Hon'ble President for resolution due to the difference of opinion between the judicial and technical members. The final decision on the penalty would be determined by a third member. The appeal filed by the appellant was dismissed by the majority, upholding the penalty imposed.

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