2010 (2) TMI 403 - AT - Central Excise

Penalty - The facts of the case are that the appellants had taken credit in their Cenvat account to the tune of Rs. 98,77,446/- as duty paid on capital goods in June, 2007. The assessee has challenged the impugned order on various grounds. The demand of interest is assailed on the ground that the same is not sustainable in view of the judgment of the Hon ble High Court of Punjab and Haryana in the case of CCE, Delhi v. Maruti Udyog Ltd., 2007 (214) E.L.T. 173 (P & H) upheld by the Apex Court as reported in 2007 (214) E.L.T. A 50, The penalty imposed under Rule 15(2) of the CCR is challenged on the ground that the said provisions applied to cases where an assessee had taken irregular credit by suppression of facts, fraud etc. Held that- no reliable finding that irregular credit availed with intention to evade payment of duty. Penalty imposed is not sustainable. Credit wrongly taken but not utilized. Demand of interest not sustainable.

Summary

Issues:
1. Demand of interest under Section 11AC of the Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rules, 2004.
2. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Act.

Analysis:
1. The appeal challenged an order confirming a demand of interest and imposing a penalty on the appellant. The appellant had taken credit in their Cenvat account without proper documentation, which was later reversed. The Commissioner found the appellant had irregularly taken excess credit and imposed interest and penalty. The appellant contested the interest demand citing legal judgments, arguing that interest was not sustainable. The Tribunal found that the penalty imposed was not justified as there was no evidence of intentional evasion of duty. Citing legal precedents, the Tribunal vacated the penalty.

2. Regarding the demand of interest, the Tribunal referred to a legal case where it was held that interest was not payable if the credit was not utilized. Applying this principle to the case at hand, the Tribunal found the demand of interest unsustainable. The Tribunal emphasized the need to strictly implement statutory provisions and follow legal interpretations provided by High Courts. As no goods were identified for the excess credit availed, the Tribunal concluded that the confiscation of goods and penalty provisions could not be invoked. Therefore, the Tribunal vacated the impugned order and allowed the appeal against the penalty and interest demands.

This detailed analysis of the judgment highlights the issues, arguments presented, legal precedents cited, and the Tribunal's reasoning leading to the decision to vacate the penalty and interest demands.