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2019 (12) TMI 1010 - HC - Service TaxPenalty under Rule 15(3) of Cenvat Credit Rules, 2004 read with Section 78 of Finance Act, 1994 - period of limitation for raising demand -Tribunal has failed to consider the question of limitation under sub-section (1) of Section 73 of the Finance Act, 1994 - HELD THAT - The question of imposition of penalty would arise only after the decision of the question on such plea of limitation. According to the learned counsels appearing for the parties, the Tribunal has to first judge as to whether the case of the assessee is covered by proviso below sub-section (1) of Section 73 of the Finance Act, 1994. After recording the findings on the aspects so covered by the proviso, the question of limitation as provided under sub-section (1) of Section 73 of the Finance Act will have to be decided. It is only thereafter the question of maintaining or setting aside the order imposing penalty passed by the lower authority would arise. The orders passed by the Tribunal and challenged in Appeal filed by assessee and department are hereby quashed and set aside - Appeal allowed.
Issues:
1. Challenge to penalties imposed under Rule 15(3) of Cenvat Credit Rules, 2004 read with Section 78 of Finance Act, 1994. 2. Consideration of limitation under sub-section (1) of Section 73 of the Finance Act, 1994. 3. Remand for recalculation of liability based on reconciliation statement. Analysis: Issue 1: Challenge to Penalties The High Court admitted Central Excise Appeal No.22 of 2017, where the Department contested the penalty imposed under Rule 15(3) of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994. The Customs, Excise and Service Tax Appellate Tribunal, Mumbai, had set aside the penalty order on 18.01.2017. The substantial question of law framed was whether the Tribunal was legally correct in doing so. Issue 2: Limitation Consideration The learned counsels for both parties agreed that the Tribunal failed to address the issue of limitation under sub-section (1) of Section 73 of the Finance Act, 1994. They emphasized that the question of penalty imposition should only arise after determining the plea of limitation. The Tribunal was required to assess if the case fell under the proviso below sub-section (1) of Section 73 before deciding on the limitation aspect. The High Court noted the need for the Tribunal to first address these issues before ruling on the penalty order. Issue 3: Recalculation of Liability Central Excise Appeal Nos. 3 and 4 of 2018 were filed by the Assessee challenging the orders dated 07.03.2017 and 03.07.2017 passed by the Tribunal. The Tribunal had remanded the matter for recalculation of liability based on a reconciliation statement. These appeals were not yet admitted, and the High Court directed the parties to appear before the Tribunal for further adjudication based on the provisions of sub-section (1) of Section 73 of the Finance Act. In conclusion, the High Court allowed all appeals, quashing the challenged orders and directing the Tribunal to re-examine the matters in light of the legal provisions. The Court emphasized the importance of addressing the issues of limitation and provisos before deciding on penalty imposition. The parties were instructed to present their case before the Tribunal for a fresh adjudication in accordance with the law, leaving all questions open and making no order as to costs.
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