2010 (1) TMI 462 - AT - Central Excise

Interest and Penalty - show cause notice has been issued to the appellant for reversal of Cenvat credit on the internal audit party s observation and demand of the interest on the goods cleared to their sister concern. Irregular availment of Cenvat credit on written off capital goods or inputs received short. Held that - exact violation of Central Excise Rule, 2002 not pointed out and penalty under Rule 27 set aside.

Summary

Issues:
1. Challenge to demand of interest under Section 11AB of the Central Excise Act, 1944.
2. Challenge to imposition of penalty under Rule 27 of Central Excise Rules, 2002.

Analysis:

Issue 1: Challenge to demand of interest under Section 11AB
The appellant contested the demand of interest under Section 11AB on the grounds that the payment was made prior to the show cause notice. The Adjudicating Authority confirmed the demand, and the Commissioner (Appeals) upheld this decision. The appellant argued that they voluntarily paid the entire duty amount before the notice, which should exempt them from interest liability. However, the Tribunal found that the appellant did not challenge the duty liability during the proceedings, leading to the confirmation of the interest demand. The appeal on non-payment of interest under Section 11AB was rejected.

Issue 2: Challenge to imposition of penalty under Rule 27
The penalty was imposed under Rule 27 of the Central Excise Rules, 2002. The appellant argued that this penalty was unwarranted as they had already reversed the Cenvat credit and had not overdrawn from their Cenvat Credit Balance. The Tribunal noted that Rule 27 can only be applied if no other penalties are imposable and if the Central Excise Rules were not followed. Since the issue pertained to irregular Cenvat credit availment, specific penalty provisions in the Cenvat Credit Rules, 2004 should have been applied. As the Revenue failed to demonstrate a violation of the Central Excise Rules, the penalty under Rule 27 was deemed unwarranted and set aside. The appeal was allowed partly on this ground.

In conclusion, the Tribunal upheld the demand for interest under Section 11AB but set aside the penalty imposed under Rule 27 of the Central Excise Rules, 2002. The appellant's challenge on these two issues was analyzed thoroughly, resulting in a partial allowance of the appeal.