2018 (9) TMI 5 - AT - Central Excise

Penalty u/r 13 of CCR 2002 - Held that - Bearing in mind the provisions of rule 13 in vogue then, it would appear that the appellant had wrongly resorted to an option that was not available, imposition of penalty in these circumstances is warranted - quantum of penalty reduced - appeal allowed in part.

Summary

Issues: Penalty imposition under erstwhile rule 13 of CENVAT Credit Rules, 2002

Analysis:
The appellant sought the setting aside of a penalty of ?2,38,132 imposed under the erstwhile rule 13 of CENVAT Credit Rules, 2002. The appellant, engaged in the manufacture of rectified spirit and denatured spirit, argued that during the relevant period, rule 6 of CENVAT Credit Rules, 2001 required the discharge of liability of 8% of the value of exempted products. Subsequently, from 1st March 2002, they were required to restrict the payment to the CENVAT credit availed by them on the input used in exempted goods. The tax authorities confirmed a liability of ?23,81,315 and imposed a penalty of ?2,38,132, which was remanded to the original authority by the Tribunal. The appellant contended that the dispute was subject to interpretation, and they had already suffered a significant interest liability, which should suffice to waive the penalty. It was further argued that an amount of ?5,00,000 had been reversed initially in accordance with the previous procedure, making the recovery of duty liability on the entire clearance unwarranted.

The Authorized Representative argued that the statutory provision was known to the appellant, and the rectification of credit was done only after the Tribunal's remand order. After considering the submissions from both sides and the provisions of rule 13 in force at that time, it was observed that the appellant had wrongly chosen an option that was not available, justifying the imposition of a penalty. However, acknowledging the discharge of liability, albeit inappropriately done, the penalty was reduced to ?1,00,000. The Tribunal upheld the imposition of a penalty but reduced the amount due to the circumstances surrounding the case.

The judgment addressed the appellant's arguments regarding the interpretation of rules and the impact of interest liability on the penalty imposition. It also considered the timing of rectification by the appellant in response to the Tribunal's remand order. Ultimately, the Tribunal found that while the penalty was warranted due to the appellant's incorrect actions, a reduction in the penalty amount was justified based on the discharge of liability. The decision provided a balanced approach, taking into account both the appellant's contentions and the legal provisions applicable during the relevant period.