2020 (6) TMI 121 - AT - Central Excise

Levy of penalty - re-credit of CENVAT Credit - Furnace Oil used as fuel in the manufacture of both dutiable and exempt goods (Wood Pulp) - the furnace oil is partly captively consumed in the same factory for manufacture of dutiable VSF and partly cleared at Nil rate of duty to Sister Unit at Nagda (MP) for manufacture and clearance of dutiable VSF - Department entertained the view that the re-credit of cenvat taken by the appellant on its own which was earlier reversed was in violation of Rule 6(1) of Cenvat Credit Rules, 2002 - HELD THAT - In the present case the appellants were reversing the cenvat credit on furnace oil used as fuel in the manufacture of dutiable VSF and exempted Wood Pulp, a part of which was being stock transferred to Sister Unit at Nagda for the manufacture of dutiable VSF. Subsequently, the appellant came to know that the High Courts and the Tribunal in large number of judgments had taken the view that the provisions of Rule 6 of Cenvat Credit Rules, 2002 are not attracted to inputs intended to be used as fuel - after that the Apex Court decision in the matter of COMMNR. OF CENTRAL EXCISE VERSUS M/S. GUJARAT NARMADA FERTILIZERS CO. LTD. 2009 (8) TMI 15 - SUPREME COURT which finally settled the issue and reversed the judgment of the High Court and the Tribunal. It is settled legal position that when there are conflicting judgments and the issue is finally resolved by the Supreme Court then in such circumstances, penalty should not be imposed. Thereafter, the appellant informed the jurisdictional authorities vide letter dated 28/04/2003 that they intend to take cenvat credit on furnace oil. Further the appellant vide their letter dated 29/08/2003 which is on record informed the Department that they had taken credit only partially till 28/02/2003 on furnace oil used as fuel and they intend to avail the balance credit for the period from 01/04/2000 to 28/02/2003 in the month of September, 2003 - The appellant deposited the entire cenvat credit which was also appropriated in the impugned order. Further we find that the appellants have also deposited ₹ 1,52,39,714/- towards interest vide Challan No. 1 dated 19/06/2012 under intimation to the Department which fact has also been accepted by the Department. Further we find that re-taking of the credit by the appellant on furnace oil used as input was not with any malafide intention but was consistent with the prevalent judicial precedent in favour of the assessee. The imposition of penalty of ₹ 11,00,000/- on the appellant under Rule 13/15 Clause (1) of Cenvat Credit Rules, 2004 is not sustainable in law - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of cenvat credit on furnace oil used as fuel.
2. Violation of Rule 6(1) of Cenvat Credit Rules, 2002.
3. Reversal and re-credit of cenvat by the appellant.
4. Imposition of penalty under Rule 13/15 of Cenvat Credit Rules, 2004.

Analysis:
1. The appeal challenged an order confirming the demand for inadmissible cenvat credit on furnace oil used as fuel, along with penalties and interest. The appellant, a Viscose Staple Fibre manufacturer, contended that the issue revolved around the eligibility of inputs intended for fuel in the manufacture of both dutiable and exempted goods. The appellant cited legal precedents and the Supreme Court's decision in a similar case to support their position that credit on fuel inputs need not be reversed for exempted goods. The appellant had deposited the disputed cenvat credit and interest as per the Commissioner's order. The Tribunal noted that the appellant's actions were consistent with prevailing judicial precedents and that there was no malafide intent. The Tribunal, following Supreme Court guidance, held that penalty imposition was unwarranted due to conflicting judgments and the subsequent clarity provided by the Apex Court.

2. The Revenue argued that the appellant violated Rule 6(1) of the Cenvat Credit Rules by re-crediting cenvat without following proper procedures. However, the Tribunal found that the appellant had rectified the credit reversal based on evolving legal interpretations and subsequent Supreme Court rulings. The Tribunal emphasized that the appellant's actions were not deliberate but based on existing legal understanding in their favor. Citing the Supreme Court's directions in a similar case, the Tribunal concluded that penalty imposition was not justified in this scenario.

3. After considering submissions and records, the Tribunal observed that the appellant had reversed and re-credited cenvat on furnace oil used as fuel, aligning with judicial interpretations favoring the appellant's position. The Tribunal highlighted the appellant's compliance with depositing the disputed amounts and interest, indicating a lack of malafide intent. Relying on legal precedents and the Supreme Court's guidance on penalty imposition in cases of conflicting judgments, the Tribunal set aside the penalty imposed on the appellant under Rule 13/15 of the Cenvat Credit Rules, 2004.

4. In conclusion, the Tribunal, based on the legal principles and precedents discussed, ruled in favor of the appellant, setting aside the penalty imposed by the Commissioner. The decision emphasized the evolving legal interpretations surrounding cenvat credit on fuel inputs and the appellant's adherence to prevailing judicial understanding, ultimately leading to the dismissal of the penalty under Rule 13/15 of the Cenvat Credit Rules, 2004.