2010 (2) TMI 438 - HC - Central Excise

Penalty For availment of excess credit - the dispute in the present case is whether Cenvat credit has been claimed over and above the limit prescribed? Held that - section 11AC of the Act would be applicable only if there is an attempt to evade duty. Case relates to reversal of amount under Rule 6(3)(b) of the cenvat Credit Rule 2004 thus section 11AC is not applicable.

Summary

Issues:
Interpretation of Section 11AC of the Central Excise Act in the context of Cenvat credit claimed beyond prescribed limit.

Analysis:

The judgment pertains to an appeal filed by the Revenue challenging orders passed by the Commissioner (Appeals) and the Customs, Excise and Service Tax Appellate Tribunal regarding the imposition of penalty under Section 11AC of the Central Excise Act. The dispute revolved around the respondent, a manufacturer of Vanaspati Ghee, claiming Cenvat credit on certain inputs exceeding the prescribed limit. The respondent had reversed the excess credit as required by Rule 12 of the Cenvat Credit Rules, 2002. The central issue was whether the respondent was liable to pay penalty and interest on the excess amount claimed. Both the Commissioner (Appeals) and the Tribunal held that Section 11AC was not applicable in this scenario, as it pertains to short payment of duty and attempts to evade duty, whereas the case at hand involved the reversal of excess credit under Rule 6(3)(b) of the Cenvat Credit Rules.

The court analyzed the language of Section 11AC and concluded that it is not applicable when there is a reversal of amount under specific rules such as Rule 6(3)(b) of the Cenvat Credit Rules. Section 11AC is designed to address situations where there is an attempt to evade duty, which differs from cases involving the reversal of excess credit. The judgment emphasized that the provisions of Section 11AC are not triggered in instances where the excess credit is reversed as per the prescribed rules. Therefore, the court upheld the findings of the Appellate Tribunal, dismissing the appeal filed by the Revenue.

In summary, the judgment clarifies the scope of Section 11AC of the Central Excise Act concerning the claiming of Cenvat credit beyond the prescribed limit. It establishes that penalties under Section 11AC are not applicable in cases where excess credit is reversed in compliance with the relevant rules, distinguishing such scenarios from instances of duty evasion. The decision provides clarity on the application of penalty provisions in excise law, ensuring that penalties are imposed appropriately in line with statutory requirements.