2012 (12) TMI 532 - AT - Central Excise

Wrong availment of Cenvat Credit - Imposition of Penalty and Interest under Rule 15 of CCR 2004 rws 11AC of Central Excise Act 1944 - Held that - On reading of Rule 15(2) it is evident that this rule is applicable only in respect of Cenvat credit wrongly availed by the assessee in relation to Inputs or Capital Goods . This rule does not apply to wrong availment of Cenvat credit in relation to Input Service . Rule 12(4) would show that it is applicable in the case in which the assessee is a service provider. However in the instant case appellant is a manufacturer and not service provider. Thus in our view Rule 15(4) is also not attracted. At best the appellant can be penalised under Rule 15(3) to the extent of Rs. 2, 000/- - thus impugned order is set aside and amount of penalty is modified to Rs. 2, 000/- in accordance with Rule 15(3) of CRR 2004.

Summary

Issues:
1. Confirmation of demand of interest for late payment in relation to wrongly availed Cenvat credit.
2. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944.

Analysis:

Issue 1: Confirmation of demand of interest for late payment
The appellant, engaged in manufacturing various products falling under specific tariff headings, availed Cenvat credit facility under Cenvat Credit Rules, 2004. The audit revealed non-receipt of Cenvat credit for certain input services used in the manufacture of an exempted product, Rectified Spirit. Upon notice, the appellant debited the Cenvat credit amount but failed to pay interest on late payment. The department issued a show cause notice leading to the confirmation of interest demand and imposition of penalty by the Asst. Commissioner and subsequent dismissal of appeal by the Commissioner (Appeals).

Issue 2: Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004
The appellant contested the penalty imposition under Rule 15 of Cenvat Credit Rules, 2004, arguing that the penalty was based on an incorrect interpretation of the rule. The appellant's representative highlighted that Rule 15(2) does not apply to wrong availment of Cenvat credit in relation to "Input Services." The department, however, supported the penalty citing Rule 15(4) which allows penalties for fraud, wilful misstatement, collusion, or contravention of the Finance Act. The Tribunal noted that the penalty imposed under Rule 15(2) was not applicable as it pertained to "Inputs" or "Capital Goods," not "Input Services." The contention that Rule 12(4) applied was rejected as it pertains to service providers, whereas the appellant was a manufacturer. Consequently, the Tribunal set aside the penalty under Rule 15(2) and modified it to Rs. 2,000 under Rule 15(3) of Cenvat Credit Rules, 2004.

In conclusion, the Tribunal upheld the demand of interest for late payment but set aside the penalty imposed under Rule 15(2) of Cenvat Credit Rules, 2004, modifying it to Rs. 2,000 under Rule 15(3).