2016 (11) TMI 232 - AT - Central Excise

Demand and recovery of an amount equal to 10% of value of exempted goods cleared in terms of Rule 6 (3) (i) of Cenvat Credit Rules, 2004 - no maintenance of separate account of inputs used for manufacture of exempted final products - Some exclusions are made for application of this provision under sub-Rule (6) of Rule 6 of Cenvat Credit Rules, 2004 - Held that - There is nothing in the amending notification to indicate the presumption that the amendment carried out in sub-Rule (6) of Rule 6 vide Notification No. 6/2010-CE dated 27/02/2010, should be considered clarificatory and apply to the clearances made in May and June, 2009. The amendment carried out by Notification No. 6/2010-CE cannot be given retrospective effect. Imposition of penalty u/r 15 (2) of Cenvat Credit Rules, 2004 - Held that - the said sub-Rule provides for penalty where Cenvat credit in respect of inputs have been utilized wrongly by reason of fraud, collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of Excise Act or Rules made thereunder with intent to evade payment of duty. We find the findings of the lower Authorities are devoid of merit in this regard. Admittedly the duty free clearances were entered in the ER-1 for the month of May 2009 and June 2009. The Original Authority records that Notification No. 6/2006-CE was not mentioned in the ER-1 and accordingly the appellants suppressed the fact from the Department. In the present case, we find the show cause notice clearly mentions that the appellants have applied to the Jurisdictional Assistant Commissioner on 25/4/2009 itself who granted permission for clearance on 13/5/2009. In such situation, we find there is no basis to allege suppression or mis-statement or intention to evade payment of duty against the appellant. The notice itself has been issued within the normal period. We find no justification for imposition of penalty equal to the confirmed amount in the present case. Accordingly, we set aside the penalty imposed on the appellant. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 6 (3) (i) of Cenvat Credit Rules, 2004 regarding demand for exempted goods clearance.
2. Applicability of Notification No. 6/2010-CE dated 27/02/2010 on clearances made in May and June 2009.
3. Imposition of penalty under Rule 15 (2) of Cenvat Credit Rules, 2004.

Analysis:
1. The appeal challenged an order demanding payment equal to 10% of the value of exempted goods cleared without duty payment under Notification No. 46/2008 CE. The appellants failed to maintain separate accounts for inputs used in exempted final products, invoking Rule 6 (3) (i) of Cenvat Credit Rules, 2004. The Tribunal found no legal basis to apply the amendment by Notification No. 6/2010-CE retrospectively to May and June 2009 clearances. The amendment did not indicate retrospective application, and case laws cited were deemed irrelevant to the specific circumstances. The Tribunal upheld the demand for the exempted goods clearance.

2. The Tribunal addressed the contention regarding the penalty imposed under Rule 15 (2) of Cenvat Credit Rules, 2004. The rule allows penalties for wrongful utilization of Cenvat credit due to fraud, collusion, misstatement, or contravention of Excise Act provisions. The Tribunal noted that the appellants had obtained permission for duty-free clearances from the Assistant Commissioner and did not suppress facts. As the show cause notice was issued within the normal period, the Tribunal found no intention to evade duty. Therefore, the penalty equal to the confirmed amount was set aside, and the appeal was partly allowed on this ground.

3. In conclusion, the Tribunal upheld the demand for payment of exempted goods clearance under Rule 6 (3) (i) but set aside the penalty imposed under Rule 15 (2) of Cenvat Credit Rules, 2004. The judgment clarified the non-retrospective application of the amendment by Notification No. 6/2010-CE and emphasized the lack of justification for imposing the penalty in the case, ultimately providing relief to the appellant only on the penalty aspect.