2018 (4) TMI 654 - AT - Central Excise

Penalty u/r 15(2) of CCR 2004 read with Section 11AC of the CEA 1944 - wrong availment of CENVAT credit - Rule 6(3) (i) of the CCR 2004 - common input services - Held that - reliance placed in the case of Commissioner of Central Excise, Ludhiana v. Sangrur Agro Ltd, 2010 (2) TMI 438 - PUNJAB & HARYANA HIGH COURT , where it was held that section 11AC of the Act would be applicable only if there is an attempt to evade duty. Case relates to reversal of amount under Rule 6(3)(b) of the cenvat Credit Rule 2004 thus section 11AC is not applicable - penalty set aside - appeal allowed.

Summary

Issues:
Reversal of CENVAT credit under Rule 6(3)(i) of the CENVAT Credit Rules, 2004; Imposition of penalty under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

Analysis:
The appeal pertains to the reversal of CENVAT credit under Rule 6(3)(i) of the CENVAT Credit Rules, 2004. The appellant had availed CENVAT credit on common input services used in manufacturing excisable and exempted goods. Upon audit, it was discovered that the appellant needed to reverse CENVAT credit on input services attributable to exempted goods as per Rule 6(3). The appellant complied by reversing the credit along with interest. However, a show cause notice was issued, demanding an amount equivalent to 6% of the value of exempted goods cleared due to the lack of separate accounts for input services. The adjudicating authority confirmed the demand, imposed a penalty, and interest. The first appellate authority accepted the reversal of credit but imposed a penalty equivalent to 50% of the credit availed under Section 11AC of the Central Excise Act, 1944.

The main contention before the Tribunal was the correctness of the penalty imposed under Section 11AC. The appellant argued that the penalty was not justified, citing a similar case before the Hon'ble High Court where the penalty was set aside. The Authorized Representative contended that the penalty was rightly imposed due to incorrect CENVAT credit availed. The Tribunal, after considering the submissions, noted that the penalty was imposed based on the establishment of suppression of facts. The penalty was calculated for different periods based on the records available, leading to a 50% penalty for one period and 100% for another. However, the Tribunal acknowledged the appellant's reference to the High Court's judgment in a similar case where it was held that Section 11AC was not applicable to cases of reversal of excess credit under CENVAT Credit Rules.

In light of the High Court's ruling, the Tribunal followed the precedent and allowed the appeal challenging the imposition of an equivalent penalty amount. The Tribunal dismissed the appeal in other respects, thereby disposing of the case accordingly.