2021 (7) TMI 101 - AT - Central Excise

CENVAT Credit - capital goods - intent to evade - suppression of facts - contravention of Rule 3 (5) of the CENVAT Credit Rules, 2004 - Rule 8 (1) of the Central Excise Rules, 2002 - extended period of limitation - Penalty - HELD THAT - The period involved in the case on hand is 2013-14 and 2014-15 and the Department audit took place between February 2017 and April 2017. Till that time, the appellant should have filed its monthly/ER-1 returns regularly/periodically/quarterly/monthly, as is applicable, possibly with the help of its auditors. If the bona fides were to be believed, then the grave irregularity, as pointed out by the Revenue, should have been attempted to be set right on its own before being pointed out since the monthly/regular ER-1 returns were not filed blindly. Obviously, therefore, upon being pointed out, the appellant felt exposed, made payments without even questioning the delay, if any, in the Revenue s audit nor did it even raise the issue of invoking the larger period when the Show Cause Notice was issued, but accepted the appropriation of its payment towards duty and interest. Penalty - HELD THAT - Admittedly, there is no challenge by the assessee-appellant to the invoking of larger period which has the same ingredients as that of Section 11AC (1) (a) ibid. It is therefore difficult to accept that the ingredients would apply for one and not when it comes to the issue of penalty - there is no provision similar to Section 73 (3) of the Finance Act, 1994 under the Central Excise Act, but rather a specific provision for penalty is there under Section 11AC. In most of the cases, facts are different, like there is quantification of duty, the payment of Service Tax was made before the issuance of Show Cause Notice which again stands on a different footing; in some cases, the penalty apparently was directed to be deleted for no suppression, but here the same is clearly for suppression of facts coupled with contravention of various provisions. Appeal dismissed.

Summary

Issues:
Whether the penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15 (2) of the CENVAT Credit Rules, 2004 is correct?

Analysis:
The judgment revolves around the issue of whether the penalty imposed on the appellant is justified. The case originated from a Show Cause Notice issued based on discrepancies found during an audit. The notice highlighted contraventions of CENVAT Credit Rules and Central Excise Rules, including non-payment of duty on cleared goods and failure to declare production in the ER-1 return. The penalty was confirmed in the Order-in-Original and upheld by the Commissioner (Appeals).

The Show Cause Notice pointed out acts of suppression and contraventions that could have gone undetected without the audit. The authority suspected the appellant had suppressed facts to avoid payment, leading to violations of the CENVAT Credit Rules. The contraventions were specifically detailed in the notice, emphasizing the lack of proper declarations by the appellant regarding goods clearance and production.

Section 11AC of the Central Excise Act, 1944, dealing with penalties for non-payment of duty due to fraud or suppression of facts, was a focal point. The judgment analyzed the intent to evade payment based on the actions of the appellant. The appellant's failure to rectify irregularities before the audit, prompt payment post-audit, and lack of challenge to the extended audit period were considered in determining the penalty applicability.

The judgment discussed the appellant's reliance on various case laws, noting differences in facts and provisions compared to the present case. The absence of challenges to the extended audit period and the presence of suppression of facts and contraventions led to the dismissal of the appeal. The decision was based on the lack of merit in the appellant's contentions, ultimately upholding the penalty imposed.

In conclusion, the judgment thoroughly analyzed the issues surrounding the penalty imposed on the appellant under Section 11AC of the Central Excise Act, 1944. The decision highlighted the importance of compliance with rules, prompt rectification of irregularities, and the consequences of suppression of facts in determining the validity of penalties in excise matters.