2009 (8) TMI 594 - AT - Central Excise

Penalty- Ignorance of law- Demand of Rs. 1,52,307/- has been confirmed on CR coils cleared as such, and penalty of equal amount has been imposed upon the appellants. Further demand of Rs. 88,982/- has been confirmed together with equal penalty. Held that-the goods cleared without payment of duty cannot be treated as exempted goods for the reason that they were further used in the manufacture of final products cleared on payment of duty. The demand of Rs. 88,982/- is therefore set aside. Thus the appeal is partly allowed by setting aside the demand of Rs. 88,982/- and the penalty of equal amount and penalty of Rs. 1,52,307/- while upholding the demand of Rs. 1,52,307/- together with interest.

Summary

Issues:
Demand confirmed on CR coils cleared as such, imposition of penalty, liability to equal penalty, dispute on demand for packing material, suppression of facts, ignorance of law, demand on goods cleared without payment of duty.

Analysis:
1. Demand on CR Coils and Penalty Imposed: The judgment confirms a demand of Rs. 1,52,307/- on CR coils cleared as such, along with an equal penalty imposed on the appellants. The demand arises from the requirement to reverse proportionate credit availed on the coils as per Rule 3(4) of the Cenvat Credit Rules, 2002. The appellants do not dispute this liability but challenge the imposition of an equal penalty. They argue that they were unaware of the amendment to Rule 3(4) and reversed the credit later, citing a Tribunal decision in support. The Vice-President agrees that there was no suppression on the part of the appellants, accepts their plea of ignorance of the law due to the recent amendment, and sets aside the penalty while upholding the demand.

2. Dispute on Demand for Packing Material: The judgment also addresses a separate demand of Rs. 88,982/- confirmed on inputs used in the manufacture of final products cleared without payment of duty. The appellants dispute this demand, relying on a decision by the Larger Bench of the Tribunal. The Vice-President finds that the goods cleared without payment of duty cannot be treated as exempted goods since they were further used in the manufacture of final products cleared on payment of duty. Consequently, the demand of Rs. 88,982/- is set aside based on the precedent set by the Larger Bench.

3. Final Decision: In conclusion, the appeal is partly allowed by setting aside the demand of Rs. 88,982/- and the penalty of equal amount, as well as the penalty of Rs. 1,52,307/-, while upholding the demand of Rs. 1,52,307/- along with interest. The judgment emphasizes the importance of considering the timing of legal amendments, the knowledge of the parties involved, and the application of relevant precedents in determining liability and penalties in excise duty matters.