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2018 (9) TMI 818 - AT - Central ExcisePenalty under Rule 25 read with Sec.11AC - wrongful utilization of CENVAT credit - GTA Services - Held that - The appellant had cleared goods and had paid Central Excise duty by the due date by wrongly utilizing the CENVAT credit which was taken after the close of the month in violation of Rule 3(4) of the CENVAT Credit Rules, 2004. The show cause notice does not propose to demand Central Excise duty - The penalty under Rule 25 read with Sec.11AC equal to the amount of duty is unsustainable because there is no demand for duty at all and is set aside. Penalty under Rule 15 of CENVAT Credit Rules - contravention of Rule 3(4) - Held that - The same is imposable but the maximum amount during the relevant period is only ₹ 2,000/-. Therefore, the penalty needs to be restricted to this extent. Interest under Rule 14 of CENVAT Credit Rules, 2004 read with Sec.11AB - Held that - The CENVAT credit is wrongly taken or utilized, an interest thereon is recoverable under Rule 14 of the CENVAT Credit Rules, 2004 - Interest demand upheld. Appeal allowed in part.
Issues: Violation of Rule 3(4) of CENVAT Credit Rules, 2004 leading to penalty imposition.
The appellant, a manufacturer of sponge iron, utilized CENVAT credit towards Central Excise duty in excess of the available balance, violating Rule 3(4) of CENVAT Credit Rules, 2004. A show cause notice demanded interest and penalties for this violation. The lower authority confirmed the demands and imposed penalties equal to the amount of duty not correctly paid. The appellant appealed on grounds of a bonafide mistake, lack of intention to evade duty, timely payment within 2-5 days, and misinterpretation of penalty provisions. The Tribunal noted the absence of a duty demand in the notice, rendering the penalty under Rule 25 unsustainable. The penalty under Rule 15 was reduced to the maximum amount permissible during the relevant period, while the interest under Rule 14 was upheld. The appellant's utilization of CENVAT credit after the close of the month, in contravention of Rule 3(4), was the central issue. The Tribunal found the penalty under Rule 25 disproportionate due to the absence of a duty demand in the notice. Consequently, the penalty was set aside. However, the penalty under Rule 15 was deemed applicable but restricted to the maximum amount permissible during the relevant period, i.e., ?2,000. The interest imposed under Rule 14 was upheld as the wrongful utilization of CENVAT credit warranted its recovery. The Tribunal's order reflected these findings, maintaining the interest, reducing the penalty under Rule 15, and setting aside the penalty under Rule 25. In conclusion, the Tribunal's decision addressed the appellant's violation of Rule 3(4) of CENVAT Credit Rules, 2004 by carefully analyzing the penalty impositions and the absence of a duty demand in the show cause notice. The judgment balanced the imposition of penalties and interest, ensuring compliance with the relevant legal provisions while considering the appellant's arguments and the specifics of the case.
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