2016 (5) TMI 658 - AT - Central Excise

Imposition of penalty - Rule 57I (4) read with Rule 173Q (1) (bb) of the Central Excise Rules, 1944 - Cenvat credit wrongly taken on inputs as soon as duty paying documents were received - No intention/suppression to evade Central excise duty - Held that - as per the procedure prescribed by the Department, credit with respect to inputs can be taken only on receipt of the finished products/intermediate goods from the job workers, when the inputs purchased by the appellant is directly sent to the job worker without receiving the same in the factory. A violation of a procedure prescribed for the convenience of the assesse will be considered as a violation of the procedure prescribed under Rule 57J of the Central Excise Rules, 1944. In the present case, all the consignments manufactured by the job worker were returned by the appellant for further processing within the prescribed time. After weighing all the evidences, bench is of the considered opinion that penalty upon the appellant is imposable under Rule 173Q (1) (bb) of the Central Excise Rules, 1944. However, appellant has only gained in taking Cenvat Credit for a few months because all the consignments have been received by the appellant for further processing within the prescribed time limit. Therefore, a penalty of ₹ 10,000/- upon the appellant will meet the ends of justice. - Decided in favour of appellant by reducing the penalty

Summary

Issues:
Imposition of penalty under Rule 173Q (1) (bb) of the Central Excise Rules, 1944 for taking credit on inputs, and the excessive penalty amount imposed by the adjudicating authority.

Analysis:
1. The appellant argued that the credit was taken immediately upon receiving documents, as per CBEC Circular No. 265/99/96-CX, and there was no intention to evade Central Excise duty. The appellant cited case laws to support the argument that no penalty should be imposed under Rule 57I (4) of the Central Excise Rules, 1944.

2. The Revenue contended that taking credit immediately upon receiving duty paying documents was incorrect as per CBEC Circulars and Apex Court decisions. Both Rule 57I (4) and Rule 173Q (1) (bb) were invoked, and the first appellate authority upheld the penalty under Rule 173Q (1) (bb).

3. The appellant further argued that penalties under Rule 173Q (1) (bb) are subject to Section 11AC of the Central Excise Act, 1944, and no penalty should be imposed without intention to deliberately take wrong credit. The excessive penalty amount was also challenged as highly disproportionate.

4. The issue revolved around whether penalty under Rule 173Q (1) (bb) was applicable for taking credit on inputs immediately upon receiving documents. The Department's prescribed procedure required credit to be taken upon receiving finished products/intermediate goods from job workers, violating which was considered an offense under Rule 57J of the Central Excise Rules, 1944.

5. Rule 173Q (1) (bb) outlines penalties for wrongly taking credit of duty on inputs without ensuring appropriate duty payment. The Tribunal found the appellant liable for penalty under this rule but considered that the appellant had only benefitted temporarily from the credit, as all consignments were received within the prescribed time limit. Thus, the penalty was reduced to &8377; 10,000 to meet the ends of justice.

In conclusion, the Tribunal allowed the appeal by reducing the penalty imposed on the appellant from &8377; 2.00 Lakhs to &8377; 10,000 under Rule 173Q (1) (bb) of the Central Excise Rules, 1944.