2014 (3) TMI 869 - AT - Central Excise

Penalty - Commissioner reduced penalty - Availment of CENAVT Credit - Held that - show cause notice demanding recovery of cenvat credit was issued under Rule 12 of Cenvat Credit Rules read with Section 11A of the Central Excise Act. The penalty under Rule 15(1) provides that any person taking cenvat credit in respect of inputs or capital goods wrongly or in contravention of any of the provisions of the rules will be liable to penalty not existing the duty on the excisable goods of which any contravention has been committed or Rs. 10,000/- (Rs. 2,000/-) w.e.f. 11-5-07 whichever is greater. Therefore the quantum of penalty leviable will be up to the duty on the excisable goods involved or Rs. 10,000/- or (Rs. 2,000/-) whichever is greater. I find that as per the Order-in-Original the penalty has been imposed under Rule 13(2) now Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Act. Rule 15(2) is para materia with the erstwhile Rule 57-I(4) of the Modvat Scheme. Even if a harmonious reading of Rule 15(1) and 15(2) of Rules the contention of the respondent that the penalty cannot be less than the excise duty involved will not find any support legally - Decided against Revenue.

Summary

Issues:
1. Reduction of penalty imposed on the assessee under Rule 13(1)
2. Validity of penalty under Rule 15(1) in relation to Cenvat Credit Rules

Issue 1: Reduction of penalty imposed on the assessee under Rule 13(1)
The appeal was filed against the Order-in-Appeal which confirmed the demand of duty and imposed penalties on the manufacturer for availing cenvat credit from non-existent suppliers. The Commissioner contended that the penalty should not be reduced below the central excise duty involved, considering the gravity of the fraud. The Revenue argued that the Commissioner (Appeals) erred in law by modifying the original order. However, the Tribunal held that there was no legal support for the contention that the penalty cannot be less than the excise duty involved, even when invoking Rule 13(1).

Issue 2: Validity of penalty under Rule 15(1) in relation to Cenvat Credit Rules
The show cause notice was issued under Rule 12 of Cenvat Credit Rules, along with Section 11A of the Central Excise Act, demanding recovery of cenvat credit. The penalty under Rule 15(1) states that any person wrongly availing cenvat credit will be liable to a penalty not exceeding the duty on the excisable goods or a specified amount. The penalty imposed in this case was under Rule 15(2) of Cenvat Credit Rules, which is similar to the earlier Modvat Scheme's provision. The Tribunal clarified that a harmonious reading of Rule 15(1) and 15(2) does not support the argument that the penalty cannot be less than the excise duty involved.

In conclusion, the Tribunal found no merits in the appeal filed by the Commissioner of Central Excise, Surat-I, and upheld the order of the Commissioner (Appeals). The appeal was disposed of accordingly.