2009 (12) TMI 352 - AT - Central Excise

Cenvat Credit- case the appellants took credit on the impugned capital goods in the year 2000 and utilized the same thereafter. In the year 2003-04, the impugned goods were sent to their job worker. As per rules, the same were required to be returned back to the appellants within 180 days. However, this was not done and after detection by the Department, the appellants reversed the credit on the impugned capital goods in November, 2005. Held that-, the entire amount of credit involved has again been allowed by the Department to be re-credited to the account of the appellants, this can hardly be held to be a case of mis-statement, fraud, suppression etc. In any case, as argued by the learned Counsel, Rule 15(2) clearly applies in respect of cases where credit has been taken or utilized wrongly whereas this was a case of contravention of Rule 3(5) of the Cenvat Credit Rules, 2004. In my considered view, such contravention would attract penal provisions not under Rule 15(2) but under the second part of Rule 15(1) which applies to contravention of any of the provisions of the Rules in respect of any input or capital goods. A contravention of Rule 15(1) attracts both confiscation and penalty.

Summary

Issues:
- Violation of Cenvat Credit Rules, 2004
- Imposition of penalty under Section 11AC
- Interpretation of Rule 14 and Rule 15(2) of Cenvat Credit Rules

Analysis:
1. Violation of Cenvat Credit Rules, 2004:
The case involved the appellants taking credit on capital goods in 2000, sending them to a job worker in 2003-04 without receiving them back within 180 days as required by the rules. The Department detected this, and the appellants reversed the credit in 2005. The goods were received back in 2008, and the appellants re-credited the amount without objection from the Department. The issue was whether this constituted a violation of the Cenvat Credit Rules.

2. Imposition of penalty under Section 11AC:
Initially, an equal penalty was imposed on the appellants for violating the Cenvat Credit Rules. The lower appellate authority reduced the penalty to Rs. One lakh, which was set aside by the Tribunal. The High Court remitted the case back to the Tribunal to reconsider in light of Supreme Court decisions. The Department argued that the penalty under Section 11AC was applicable due to the demand raised under the proviso to Section 11A.

3. Interpretation of Rule 14 and Rule 15(2) of Cenvat Credit Rules:
The appellants argued that the case did not involve taking credit wrongly or utilizing it wrongly, but rather a violation of Rule 3(5) regarding the payment required when goods are removed for over 180 days. The Tribunal found that Rule 15(2) did not apply as there was no mis-statement, fraud, or suppression. Instead, the contravention fell under the second part of Rule 15(1), attracting a penalty limited to the duty on the goods or Rs. 10,000, whichever is greater. The penalty was thus reduced to Rs. 10,000, acknowledging the unintentional nature of the violation and the subsequent corrective actions taken by the appellants.

In conclusion, the Tribunal partially allowed the appeal, reducing the penalty from Rs. One lakh to Rs. 10,000 based on the interpretation of the Cenvat Credit Rules and the specific circumstances of the case, emphasizing the distinction between contraventions under Rule 15(2) and Rule 15(1.