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2023 (5) TMI 432 - AT - Central ExciseLevy of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act - CENVAT Credit on additional duty paid on capital goods under EPCG scheme - availment of benefit of Notification No. 97/2004 dated 17.09.2004 and Notification No. 64/2008 dated 09.05.2008 thereby the capital goods imported - HELD THAT - From the entire findings recorded in the impugned order, we do not find any reason by which it could have been concluded that the case of willful suppression/misstatement, collusion etc. has been made out against the appellant. The mistake committed by the appellant could have been an inadvertent mistake. In the case of Rajasthan Spinning and Weaving Mills 2009 (5) TMI 15 - SUPREME COURT Hon ble Supreme Court has clearly stated that without proving the existence of such ingredients, penalty under Section 11AC should not have been imposed. In the present case the appellant has, on being pointed out, paid the entire amount of the credit wrongly taken along with interest much prior to the issuance of show cause notice. On being informed, the issue should have been settled under Section 11A(2B) of the Central Excise Act - Reliance placed in the decision in the case of COMMISSIONER OF CENTRAL EXCISE-I VERSUS GAURAV MERCANTILES LTD. 2005 (8) TMI 120 - BOMBAY HIGH COURT where it was held that Factual matrix reveals that the show cause notice was issued on 19-4-2002 whereas entire amount of duty and penalty was paid on 31-1-2001 and 1-9-2001. It is thus clear that the entire duty liability was paid prior to the issuance of show cause notice. The order of the Commissioner to the extent of imposition of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act cannot be upheld. Appeal allowed in part.
Issues Involved:
1. Wrongful availment of Cenvat credit. 2. Liability to pay interest. 3. Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act. Issue-wise Detailed Analysis: 1. Wrongful Availment of Cenvat Credit: The appellant, engaged in the manufacture of aluminum products, imported capital goods under the EPCG and DEPB schemes. They availed Cenvat credit of additional duty on capital goods imported under the DEPB scheme and also under the EPCG scheme against nine Bills of Entry. During a CERA audit, it was observed that the capital goods imported under the EPCG scheme did not suffer any additional duty under Section 3 of the Customs Tariff Act due to the benefit of Notification No. 97/2004 and Notification No. 64/2008. Consequently, the credit availed was not due to them. Upon being pointed out, the appellant paid the wrongly availed credit amounting to Rs. 3,13,57,481/- along with interest, and informed the department of their mistake. The Commissioner confirmed the demand of wrongly availed credit under Section 11A(1)/11A(1)(a) of the Central Excise Act. 2. Liability to Pay Interest: The Commissioner held that the appellant was liable to pay interest of Rs. 1,26,11,353/- under Section 11AB read with Rule 14 of the Cenvat Credit Rules, 2004. The interest amount was already paid by the appellant and was appropriated by the Commissioner. 3. Imposition of Penalty: The Commissioner imposed a penalty of Rs. 3,13,57,481/- under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act. However, the penalty was reduced to 25% of the amount since the appellant had already paid the duty along with interest as per Section 11AC(3). The appellant argued that the mistake was genuine and there was no intent to evade duty. They cited several judgments to support their contention that penalty should not be imposed in cases of genuine mistakes without any malafide intent. The Tribunal considered these arguments and the findings of the Commissioner, noting that the appellant had paid the entire amount of the wrongly availed credit along with interest prior to the issuance of the show cause notice. The Tribunal referenced the judgment in Rajasthan Spinning and Weaving Mills, where the Supreme Court stated that penalty under Section 11AC is for deliberate deception with intent to evade duty. The Tribunal concluded that there was no evidence of willful suppression, misstatement, or collusion by the appellant. The mistake appeared to be inadvertent. Following the precedent set by the Supreme Court in Rajasthan Spinning and Weaving Mills and Indian Aluminium Co. Ltd., the Tribunal held that penalty under Section 11AC should not have been imposed in the absence of deliberate intent to evade duty. Conclusion: The Tribunal allowed the appeal, modifying the order of the Commissioner to the extent that the imposition of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act was not upheld. The order was pronounced in the open court.
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