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2014 (11) TMI 860 - HC - Central ExciseCENVAT Credit - Penalty u/s 11AC - Bombay High Court admitted the appeal of the Revenue filed against the decision of CESTAT MUMBAI 2005 (4) TMI 202 - CESTAT, MUMBAI on the following substantial questions of law - Whether in the facts and circumstances of the case the Tribunal is right in holding that the penalty levied upon the respondents by the Adjudication Authority for availing Modvat Credit on full quantity shown in the invoices when in fact quantity of inputs received in factory was short and thus huge amount of ₹ 9,33,428/ credit was wrongly availed of by the Respondent? Whether in the facts and circumstances of the case the Adjudicating Authority was wrong in confirming the demand and imposing equal penalty upon the respondent under Section 11AC of the Central Excise Act, 1944 and imposing the penalty under Rule 25 and 27 of the Central Excise (No. 2) Rules 2001, particularly when it is on record the shortage of quantity was large? Whether the Tribunal was right in ignoring the decisions of the CESTAT in the matter of M/s. Bombay Dyeing & Mfg. Co. Ltd. reported at 1999 (5) TMI 210 - CEGAT, MUMBAI which case is directly applicable in the present case. The Bombay Dyeing s decision clearly lays down that the inputs received on weighing are less that what is actually supplied. The assessee is liable to penalty for such short supply?
Issues:
1. Interpretation of penalty for availing Modvat Credit on incorrect quantity of inputs. 2. Confirmation of demand and imposition of penalties under Central Excise Act and Rules. 3. Relevance of previous decisions by CESTAT in similar cases. Analysis: 1. The first issue raised in the judgment pertains to the penalty levied on the respondents for availing Modvat Credit based on the full quantity shown in the invoices, despite the actual quantity of inputs received being less. The court questions the correctness of the Tribunal's decision in allowing the penalty and the wrongful availing of credit amounting to Rs. 9,33,428 by the respondent. The crux of the matter lies in determining the discrepancy between the invoiced quantity and the actual quantity received by the factory. 2. Moving on to the second issue, the Adjudicating Authority's decision to confirm the demand and impose penalties under Section 11AC of the Central Excise Act, 1944, along with penalties under Rule 25 and 27 of the Central Excise (No. 2) Rules 2001, is under scrutiny. The court questions the appropriateness of imposing equal penalties considering the significant shortage in the quantity of inputs received. The judgment highlights the importance of assessing penalties in proportion to the severity of the violation. 3. Lastly, the judgment delves into the relevance of previous decisions by the CESTAT, specifically referencing the case of M/s. Bombay Dyeing & Mfg. Co. Ltd. The court evaluates whether the Tribunal erred in disregarding the precedents set by the CESTAT in similar cases. The applicability of the Bombay Dyeing case, which establishes liability for penalties in cases of short supply of inputs compared to the supplied quantity, is a pivotal point of consideration in the judgment. In conclusion, the High Court of Bombay admitted the appeals based on the substantial questions of law raised regarding the penalty for incorrect availing of Modvat Credit, confirmation of demand, imposition of penalties under relevant provisions, and the relevance of past decisions by the CESTAT. The judgment reflects a meticulous analysis of the legal issues at hand, emphasizing the need for a thorough examination of facts and legal precedents in adjudicating matters related to excise duties and penalties.
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