2009 (7) TMI 294 - AT - Central Excise

Modvatable input stock of the appellant was destroyed on account of heavy rains. The appellants reversed the credit of duty so availed in respect of said input. The dispute in the present appeal relates to only interest of Rs. 32,530/- and penalty of Rs. 3,000/- imposed upon the appellant under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of CEA, 1944. Held that interest is not leviable - there was no mala fide on the part of the assessee and loss of the goods was on account of natural cause hence, held that imposition of penalty in such circumstances is not called for

Summary

Issues:
Interest and penalty imposed on the appellant under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of CEA, 1944.

Analysis:

Interest Imposition:
The appellant's Modvatable input stock was destroyed due to heavy rains, leading to the reversal of duty credit. The issue in question pertains to the interest of Rs. 32,530/- imposed on the appellant. The learned advocate argued that since the credit was reversed due to the destruction of inputs, interest under Section 11AB of the Act should not be levied. Citing the Tribunal's decision in the case of Sweet Industries, it was established that Section 11AB applies to cases of non-levy or short levy of Excise duty, not to situations where inputs have been destroyed. Consequently, the interest imposition was set aside based on the precedent provided by the Sweet Industries case.

Penalty Imposition:
Regarding the penalty of Rs. 3,000/- imposed on the appellant, it was found that there was no mala fide intent on the part of the assessee, and the loss of goods was due to a natural cause, i.e., heavy rains. Referring to the Tribunal's decision in the case of Asian Paints (I) Ltd. v. CCE, Mumbai, it was determined that penalty imposition in such circumstances is unwarranted. Therefore, the penalty imposed on the appellant was set aside following the precedent established in the Asian Paints case.

In conclusion, the appeal was allowed by setting aside both the interest and penalty imposed on the appellant. The judgment reflects a balanced consideration of the circumstances surrounding the destruction of the appellant's input stock and the absence of any deliberate wrongdoing or negligence on their part.