2016 (12) TMI 1213 - AT - Central Excise

Imposition of penalty - irregular availment of credit - credit reversed before issuance of SCN - rebate claim - Held that - The appellant is not agitating the issue on admissibility of CENVAT Credit taken in respect to certain inputs. It is the case of the appellant that penalty cannot be imposed upon them as the inputs were used in the manufacture of finished goods exported under bond. However, Ld. Advocate appearing for the appellant could not correlate the fact that inputs used in the manufacture of finished goods exported under bond. It is observed from Order-in-Appeal dated 31/3/2014 passed by the first appellate authority that reasons have been given by upholding equivalent penalty imposed upon the appellant. Under the self-assessment procedure greater trust and responsibility is placed on the assessee to appropriately follow Central Excise procedures and discharge duty. Irregularity in taking CENVAT Credit could be detected only during the course of audit undertaken by the Department. Accordingly, it is held that imposition of equivalent penalty was correctly upheld against the appellant. On merits the appeal filed by the appellant is rejected. However, it is observed from Order-in-Original No. 29/DKN/2012-13 dated 19/2/2013 that adjudicating authority has not given option of 25% of reduced penalty to the appellant under Section 11AC of the Central Excise Act, 1944. Accordingly, appellant is extended the option of 25% reduced penalty imposed under Rule 15 (2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944, provided the above amount of reduced penalty is paid within one month from the date of receipt of this order. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Imposition of equivalent penalty upheld by the first appellate authority.
2. Admissibility of CENVAT Credit in respect to certain inputs.
3. Applicability of reduced penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:

Imposition of Equivalent Penalty:
The appellant challenged the imposition of an equivalent penalty upheld by the first appellate authority. The appellant contended that the entire amount of CENVAT Credit, along with interest, related to finished goods was reversed before the show cause notice was issued. The appellant argued that the finished goods were exported under bond, and any confusion regarding irregular CENVAT Credit could have been resolved by claiming rebate after duty payment on the exported goods. The appellant claimed that no penalty should be imposed. However, the Revenue argued that the appellant failed to provide documentary evidence supporting the claim that inputs were used in the manufacture of the exported finished goods. The Tribunal noted that the appellant did not contest the admissibility of CENVAT Credit but focused on the penalty issue. Ultimately, the Tribunal upheld the equivalent penalty, emphasizing the responsibility of the assessee to comply with Central Excise procedures and discharge duties correctly.

Admissibility of CENVAT Credit:
The appellant did not dispute the admissibility of CENVAT Credit concerning certain inputs. The appellant's argument centered on the penalty imposition due to the export of finished goods under bond. Despite the appellant's claim that the inputs were used in the exported goods' manufacture, the Tribunal found a lack of correlation between the inputs and the finished goods exported under bond. The Tribunal highlighted the importance of self-assessment procedures and the Department's audit role in detecting irregularities in CENVAT Credit claims. Consequently, the Tribunal rejected the appeal on merits, affirming the imposition of the equivalent penalty.

Applicability of Reduced Penalty:
The adjudicating authority did not offer the appellant the option of a reduced penalty of 25% under Section 11AC of the Central Excise Act, 1944. The Tribunal extended this option to the appellant, provided the reduced penalty amount is paid within one month from the date of the order. As a result, the appellant was allowed the benefit of the reduced penalty under Rule 15(2) of the CENVAT Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944. The appeal was allowed only to the extent of granting this reduced penalty option, as indicated by the Tribunal.