2014 (4) TMI 504 - HC - Central Excise

Intention to evade duty - CENVAT Credit - assessee was not aware of the same, therefore, reversed the credit on the basis of the transaction value of the inputs, paid the differential amount in October 2003 - Equivalent penalty u/s 11AC - Suppression of facts - whether equal penalty is leviable on the ground that although the amendment to Rule 3(4) of the Cenvat Credit Rules, 2002 was introduced on 01.03.2003 - Held that - The Tribunal, after examining the facts pointed out that Rule 3(4) of the Cenvat Credit Rules, 2002 came into effect on 01.03.2003 and the assessee s plea that they were ignorant about such an amendment for some period of time was found to be acceptable. Furthermore, the Tribunal noticed that though the amendment came into effect from 01.03.2003 and the Department did not act immediately by issuing a show cause notice within the period of limitation prescribed under the Act. Further on perusal of the allegations made in the show cause notice, it is evidently clear that there is no material placed by the Department to establish that the conduct of the assessee in reversing the credit on the basis of the transaction value of the inputs, though the amendment came into effect from 01.03.2003 was with an intention to evade payment of duty. Thus in the absence of such a finding that there was intention to evade payment of duty, the Tribunal rightly deleted the penalty under Section 11AC of the Act - Decided against Revenue.

Summary

Issues:
1. Imposition of penalty under Rule 13 of Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944.
2. Availing cenvat credit on inputs used in the manufacture of job work goods cleared without payment of duty.
3. Suppression of material facts with intention to evade payment of duty.

Analysis:

Issue 1: Imposition of penalty under Rule 13 of Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944
The appeal questioned the correctness of the Tribunal's order in favor of the respondent, partly setting aside the demand and penalty while upholding the demand. The Tribunal examined whether the penalty imposed by invoking Rule 13 of Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 was justified. The appellant conceded that Question 2 was not pressed, focusing on the imposition of penalty equivalent to the duty amount. The Tribunal scrutinized the facts and found that the penalty was not warranted as there was no evidence of intent to evade payment of duty. Consequently, the Tribunal rightly deleted the penalty under Section 11AC of the Act, leading to the dismissal of the Civil Miscellaneous Appeal.

Issue 2: Availing cenvat credit on inputs used in the manufacture of job work goods cleared without payment of duty
The case involved the respondent availing cenvat credit on inputs used for job work goods cleared without duty payment. The Department alleged that the credit was not reversed as required, leading to a demand for payment. The Tribunal examined the situation and noted that the amendment to Rule 3(4) of the Cenvat Credit Rules, 2002 came into effect on 01.03.2003. The Tribunal accepted the respondent's claim of ignorance regarding the amendment for a period. Additionally, it observed that the Department did not act promptly by issuing a show cause notice within the prescribed limitation period. As there was no evidence of an intention to evade duty payment, the Tribunal ruled in favor of the respondent, deleting the penalty under Section 11AC of the Act.

Issue 3: Suppression of material facts with intention to evade payment of duty
The core issue revolved around whether the respondent suppressed material facts with the intent to evade duty payment. The Tribunal analyzed the circumstances and found that the respondent's actions, including reversing credit based on the transaction value of inputs after the amendment, did not indicate an intention to evade duty payment. The absence of evidence supporting the Department's claim of suppression led the Tribunal to delete the penalty under Section 11AC of the Act. Consequently, the Tribunal's decision was upheld, and the appeal was dismissed in favor of the respondent.

By thoroughly examining the issues of penalty imposition, cenvat credit availing, and suppression of facts, the Tribunal's decision was found to be legally sound and justified in the given context.