2023 (3) TMI 1123 - AT - Central Excise

Levy of personal penalty under Rule 15(1) of Cenvat Credit Rules, 2004 - wrong availment of CENVAT Credit by the company - appellant submits that appellant is a technocrat and employed as Director operations and looking after production activities of the Company - SCN barred by time limitation or not - HELD THAT - The appellant is an employee Director in the Company M/s. Diamond Power Transformers Limited who was alleged to be indulged in fraudulent availment of Cenvat credit. Penalty in the present case was imposed under Section 15(1) of Cenvat Credit Rules, 2004 on the appellant on the ground that he was overall in-charge and involved in the fraudulent availment of Cenvat credit. From the plain reading of Rule 15(1), it is found that a person shall be liable to penalty who takes or utilize Cenvat credit in respect of input or capital goods or input services wrongly or in contravention of any of the provisions of these Rules - In the facts of the present case, it is M/s. Diamond Power Transformers Limited who has availed fraudulent Cenvat credit, the appellant being employee Director has not availed Cenvat credit for himself therefore, Rule 15(1) is not applicable on the person who has neither availed Cenvat credit nor is the beneficiary of Cenvat credit. Accordingly, penalty under Rule 15(1) was wrongly imposed on the appellant. This issue has been considered by this Tribunal in the case of SHRI MUKESH DANI, SHRI DH WADHWANI VERSUS C.C.E. S.T. -SURAT 2017 (3) TMI 1145 - CESTAT AHMEDABAD wherein it was held that personal penalty has been proposed to be imposed on the appellants under Rule 15 of CCR, 2004, and the authority below has nowhere observed that the correct Rule is other than Rule 15 of CCR, 2004, hence, the plea raised by the ld. AR for the Revenue cannot be accepted at this stage. The penalty under Rule 15(1) on the present appellant, who is merely an employee of the Company, is not sustainable - appeal allowed - decided in favour of appellant.

Summary

Issues involved:
The issues involved in the judgment are imposition of penalty under Rule 15(1) of Cenvat Credit Rules, 2004 on an employee Director of a Company for alleged fraudulent availment of Cenvat credit, and the contention regarding the timeliness of the show cause notice.

Imposition of Penalty under Rule 15(1) of Cenvat Credit Rules, 2004:
The appellant, an employee Director in the Company, was penalized for the alleged fraudulent availment of Cenvat credit by the Company. The penalty was imposed under Section 15(1) of the Cenvat Credit Rules, 2004, on the grounds that the appellant, being overall in-charge, was involved in the wrongful availment of credit. However, the Tribunal noted that Rule 15(1) specifies that a person shall be liable to penalty if they themselves avail Cenvat credit wrongly. Since the Company availed the fraudulent credit and not the appellant individually, the penalty under Rule 15(1) was deemed wrongly imposed. This interpretation was supported by a previous decision in the case of Mukesh Dani vs. CCE, Surat, where it was held that personal penalty on employees of a company is not sustainable under Rule 15 of CCR, 2004. Therefore, the Tribunal set aside the penalty imposed on the appellant, as he was merely an employee and not the beneficiary of the availed credit.

Timeliness of Show Cause Notice:
The appellant contended that the show cause notice was time-barred as it was not served in a timely manner. However, the judgment primarily focused on the issue of penalty imposition under Rule 15(1) of the Cenvat Credit Rules, 2004. The Tribunal did not delve into the timeliness aspect of the show cause notice in detail, as the decision to set aside the penalty was based on the incorrect application of the penalty provision rather than the procedural aspect of the notice. Therefore, the timeliness of the show cause notice did not play a significant role in the final decision of the Tribunal.

Separate Judgement by Judges:
No separate judgment was delivered by the judges in this case. The order was pronounced in the open court on 24.03.2023 by the Members of the Appellate Tribunal CESTAT Ahmedabad, Mr. Ramesh Nair (Member - Judicial) and Mr. C.L. Mahar (Member - Technical).