2016 (11) TMI 1219 - AT - Central Excise

Option to pay reduced penalty - job-worker to M/s. Parle Products Private Ltd. - assesee cannot be treated as own unit of M/s Parle Products Pvt. Ltd., for distribution of input service tax credits - period from 01.08.2005 to June, 2011 - time bar - whether the Commissioner (Appeals) has powers to give the benefit of 25% reduced penalty? - Held that - the department has clarified that the benefit of reduced penalty would be available only at the stage of passing of the order by the Adjudicating Authority. In the instant case, in para 7.6 of the Impugned Order, the Commissioner (Appeals) has relied upon the judgments rendered in in K.P. Pouches Pvt. Ltd., vs Union of India 2008 (1) TMI 296 - DELHI HIGH COURT and Shreeji Aluminum Pvt Ltd., vs CCE, Vapi 2012 (10) TMI 418 - CESTAT, AHMEDABAD It is not in dispute that in the present case, the respondent was not given an option to pay reduced penalty of 25% of duty, In K.P. Pouches Adjudicating Authority levied an incorrect penalty without giving an option to pay reduced penalty, the assessee was left with no choice but to challenge the penalty which he would otherwise have to pay, which is statutorily not actually leviable. Since statutory authorities have themselves acted illegally and contrary to first proviso to Section 11AC ibid, the assessee cannot be faulted for challenging the order. Moreover in the present case, the Commissioner (Appeals) has set aside the demand which is hit by the limitation and has directed the Lower Authority to re-quantify the demand for the normal period. Accordingly there is a re-determination of duty. The mandatory penalty has also to be revised according to the liability determined for the normal period. In such circumstances, the respondent has to be given an option to pay the reduced penalty in respect of the re-quantified/demand. Therefore I do not find any illegality in the order passed by Commissioner (Appeals) - no error in giving option to pay reduced penalty - appeal dismissed - decided against Department.

Summary

Issues:
Department's appeal against reduced penalty order by Commissioner (Appeals), Applicability of reduced penalty option, Time-barred demand, Authority to grant reduced penalty option.

Analysis:
The appeal was filed by the department against the Commissioner (Appeals) order allowing the respondent to pay a reduced penalty. The case involved the respondent availing CENVAT credit on inputs and capital goods, including invoices from their principal's registered office. The department contended that the respondent, a job worker for the principal, could not be considered as part of the principal's unit for tax credit distribution. A Show Cause Notice was issued for wrongly availed credit from 2005 to 2011, totaling ?14,49,469, with interest and penalties.

The Original Authority upheld the demand and imposed penalties, leading the respondent to appeal. The Commissioner (Appeals) ruled the demand beyond five years as time-barred, directing a re-calculation of the amount for the normal period and reducing the penalty by 25%. The department argued that the reduced penalty option should not be granted as per Circular No.898/18/2009-CX, and once an appeal is filed without opting for reduced penalty, the option is forfeited.

The issue revolved around whether the Commissioner (Appeals) had the authority to allow the 25% reduced penalty. The Circular specified that the reduced penalty option should be availed at the Adjudicating Authority stage. Citing previous judgments, the Commissioner (Appeals) justified granting the reduced penalty due to the absence of the option earlier. Additionally, the time-barred demand was set aside, leading to a re-calculation of duty and revised penalties, warranting the reduced penalty option for the respondent. The tribunal found no illegality in the Commissioner (Appeals) order and dismissed the department's appeal.