2015 (10) TMI 1835 - AT - Central Excise

Reversal of credit for use of inputs in generation of electricity - Imposition of penalty - Rule 15(2) of the Cenvat Credit Rules, 2004 - Captive consumption - Bagasse - Held that - There was justification for the appellant to entertain the belief that it was outside the purview of Rule 6 and there was no requirement for reversal the cenvat credit. However, once the cenvat credit has been reversed along with interest, there was no requirement for the Central Excise department to proceed further for imposition of penalty, especially by invoking the provisions of Rule 15(2) of the Rules, which, in clear and unambiguous terms provides that in case of fraud, collusion, or wilful mis-statement, or suppression of facts with intent to evade payment of duty, the said provision can be invoked and not otherwise. The record reveals that suppression, misstatement etc., cannot be alleged against the appellant, since a genuine belief regarding non-maintenance of separate accounts was entertained by it. Admittedly, non-reversal of cenvat credit in the present case is not attributable to any fraud, collusion, mis-statement etc., and accordingly, provisions of Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 cannot be invoked for imposition of penalty on the appellant. - there was no justification for invoking the provisions of Rule 15(2) of the rules for imposition of penalty in the impugned order. - Therefore, the impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004.

Analysis:
1. The appellant, engaged in manufacturing Sugar and Molasses, used 'Bagasse' as a by-product for generating electricity within the factory. The Department contended that since electricity is an exempted final product, cenvat credit could only be availed on electricity used captively, not wheeled out. The Department initiated proceedings for recovery of cenvat credit, leading to a penalty imposition under Rule 15(2) of the Cenvat Credit Rules, 2004.

2. The appellant argued that electrical energy is not excisable goods and Rule 6 did not apply initially. They reversed the cenvat credit later. The appellant believed they were outside Rule 6's purview. The Tribunal's precedent supported this stance. The appellant claimed no intent to evade duty, so Rule 15(2) penalty was unjustified.

3. The Revenue argued that electricity is excisable, citing the Central Excise Tariff. They claimed the appellant should have reversed cenvat credit monthly. They relied on a Tribunal case and a Supreme Court judgment to support their position.

4. The Tribunal found no duty rate for electrical energy in the Tariff Act and no notification exempting it from duty. Citing precedent, the Tribunal agreed with the appellant's belief about Rule 6. As there was no intent to deceive, the Tribunal held Rule 15(2) penalty inapplicable. Precedents on suppression and intent to evade duty were cited to support this decision.

5. The Tribunal concluded that the appellant's non-reversal of cenvat credit did not involve fraud or collusion. Therefore, Rule 15(2) penalty could not be imposed. The Tribunal distinguished the Revenue's cited cases, stating they were not applicable to the penalty issue. Consequently, the Tribunal set aside the impugned order and ruled in favor of the appellant.