2012 (7) TMI 355 - AT - Central Excise

Denial of CENVAT credit on lead acid battery and UPS System used in their office and the Cenvat Credit on S. Tax was not available prior to 10/9/2004 - appellant reversed the credit alongwith interest on being pointed out - Held that - As duty amount is paid before issuance of SCN and the appellant have not been given any option in terms of Section 11AC under 1st proviso for payment of 25% of penalty as decided in the case of Commr. of C. Ex. & Customs, Surat-I Vs. Harish Silk Mills 2010 (2) TMI 494 (HC) that if the duty amount with interest is not paid in time and even reduced penalty of 25% of the duty amount is not paid in time and option is not given to the respondent assessee, we have taken the view that such option should be given to the assessee and period of 30 days would commence from the date of giving such option - partly in favour of assessee.

Issues:
1. Appeal against order upholding lower adjudicating authority's decision.
2. Availment of CENVAT credit on lead acid battery and UPS system.
3. Show cause notice invoking extended period and penalty imposition.
4. Contention regarding reversal of credit before issuance of show cause notice.
5. Knowledge of Department about credit availed on lead acid battery and UPS system.
6. Applicability of Section 11AB and suppression of facts.
7. Contesting penalty imposition and discretion of adjudicating authority.
8. Appellant not pressing for confirmed demand but challenging penalty.
9. Imposition of penalty and lack of discretion under Section 11AC.
10. Option for appellant to deposit reduced penalty within 30 days.

Analysis:
The appeal was filed against an order upholding the decision of the lower adjudicating authority. The case involved the appellant, engaged in the manufacture of Metal Finishing Chemical, availing CENVAT credit on lead acid battery, UPS system, and service tax before a specific date. The Department found discrepancies during scrutiny, leading to the issuance of a show cause notice invoking the extended period and imposing penalties. The appellant argued that they had reversed the credit before the notice was issued, questioning the need for the notice under Section 11AB despite the Department's knowledge. However, the appellant did not contest the demand but sought to set aside the penalty.

The Tribunal analyzed the facts and records, noting that the appellant did not inform the Department about availing the credits in question. The Tribunal referred to the explanation under Section 11A regarding suppression of facts, citing relevant case law. It was observed that the appellant was only contesting the penalty and not the confirmed demand. The Tribunal emphasized that once a demand is confirmed, the adjudicating authority has no discretion to vary the penalty under Section 11AC.

Referring to a Supreme Court decision, the Tribunal held that there was no reason to interfere with the imposition of the penalty. Additionally, the Tribunal highlighted a High Court decision regarding the option for the appellant to deposit 25% of the penalty within 30 days. Failure to comply would result in liability for the full penalty amount. Consequently, the Commissioner (Appeals) order was set aside, and the appeal was allowed to the extent of providing the appellant with the option to pay the reduced penalty within the specified timeframe.

← Previous Next →