2013 (1) TMI 200 - AT - Central Excise

Wrong availment of Cenvat Credit - assessee contested that non-reversal of CENVAT Credit was purely a clerical mistake on part of the operating persons - appellants only challenged the imposition of penalty under Rule 15 of CCR r.w.s. 11AC - Held that - The appellants were aware that no duty was being paid on the clearances of the optional accessories as the same were optional and bought out items. In terms of provisions of Rule 3(5) of the Cenvat Credit Rules, they were required to reverse/pay the amount equal to the CENVAT Credit availed on such accessories while clearing the same along with the final product, which they have not done and such a mistake cannot be accepted as a clerical error and the appellants submissions in this regard are rejected. Since they have availed such credit despite knowing that the value of such accessories is not included in the assessable value of the final products and nor these accessories/inputs are capital goods for such product, the intention to wrongly avail CENVAT Credit is quite obvious and consequently they are liable for penal action under Rule 15 of the Cenvat Credit Rules read with Section 11AC. As the appellants have cleared the input to their sister unit without raising any invoices for such clearance and have neither paid the duty nor reversed the CENVAT Credit, appellants have clearly violated the provisions of the Cenvat Credit Rules and accordingly, liable to penalty under Rule 15 of the Cenvat Credit Rules - assessee s reliance on the case of Mafatlal Industries Ltd. (2008 (10) TMI 517 - CESTAT, AHMEDABAD) on the ground of revenue neutrality is not applicable as wherever the intention to evade the payment of duty is found, in such situation the benefit on ground of revenue neutrality is not available to the appellants - against assessee.

Summary

Issues:
- Wrong availment of CENVAT Credit on optional accessories
- Failure to determine correct value of goods cleared to sister unit
- Undervaluation of final products by not including forwarding charges
- Non-payment of duty on clearance of inputs to group companies

Analysis:
1. Wrong Availment of CENVAT Credit on Optional Accessories:
The appellants availed CENVAT Credit on optional accessories not considered as inputs, leading to short payment of duty. The Tribunal rejected the appellants' claim of clerical error, stating their awareness of the duty evasion. As per Rule 3(5) of Cenvat Credit Rules, failure to reverse/pay the credit on such accessories is not a clerical mistake but a deliberate act to evade duty, justifying penalty imposition under Rule 15 of Cenvat Credit Rules.

2. Failure to Determine Correct Value of Goods Cleared to Sister Unit:
The appellants cleared inputs to their sister unit without invoices or duty payment, violating Cenvat Credit Rules. The Tribunal found this act as an intentional evasion of duty, leading to penalty imposition under Rule 15 of Cenvat Credit Rules.

3. Undervaluation of Final Products by Not Including Forwarding Charges:
The appellants undervalued final products by excluding forwarding charges from the assessable value, resulting in short payment of duty. The Commissioner waived penalties on some issues, but upheld penalties on issues related to undervaluation. The Tribunal confirmed the penalties, stating the intentional evasion of duty justifies penalty imposition.

4. Non-Payment of Duty on Clearance of Inputs to Group Companies:
The appellants failed to pay duty on inputs cleared to group companies without invoices, violating Cenvat Credit Rules. The Tribunal held that this act was an intentional evasion of duty, warranting penalty imposition under Rule 15 of Cenvat Credit Rules.

5. Reliance on Precedents and Legal Interpretation:
The appellants argued for relief based on revenue neutrality and cited legal precedents. However, the Tribunal clarified that the benefit of revenue neutrality does not apply when there is an intention to evade duty. Additionally, the Tribunal highlighted that the cited legal decisions do not apply when contravening provisions with intent to evade duty. Consequently, the Tribunal upheld the penalties imposed by the Commissioner and dismissed the appeals.