2016 (12) TMI 1319 - AT - Central Excise

Penalty - reversal of cenvat credit @8% on the removal of exempted goods before issuance of SCN - Held that - it is correctly pointed out by the learned counsel that the amount of 8% of the value of the exempted goods is paid off by the respondent on being pointed out that the said amount is due from them and so it is to be noted that the products tractors were dutiable till July 2004 and were exempted by notification due to which there may be confusion - the confirmation of the amounts of 8% of the value of exempted goods is not akin any duty which is short levied or short paid - Appeal rejected - decided in favor of the assessee.

Summary

Issues:
Appeal against restoration of penalty imposed by adjudicating authority but set aside by first appellate authority.

Analysis:
The appeal was filed by the Revenue against the restoration of penalty imposed by the adjudicating authority but set aside by the first appellate authority. The respondent, engaged in manufacturing various goods, availed cenvat credit on central excise duty paid on inputs. A notification exempted tractors from duty, but it was observed that the respondent did not maintain separate accounts for common inputs used in dutiable and exempted goods during a specific period. Consequently, a penalty was imposed by the adjudicating authority, which was later set aside by the first appellate authority.

The departmental representative argued that the penalty should be levied on the respondent for not maintaining separate accounts for inputs used in exempted and dutiable products. The respondent contended that they had paid the required amount before the show cause notice was issued and that penalties under the Cenvat Credit Rules, 2002 were unwarranted as Section 11AC did not apply in this case.

After considering the submissions and reviewing the records, the Tribunal found the appeal by the Revenue lacked merit for several reasons. Firstly, the respondent had paid the 8% amount of the value of exempted goods upon being informed by the Revenue. Secondly, the Tribunal noted that this amount was not akin to short levied or short paid duty but was related to the utilization of common inputs. Since there was no recovery mechanism under Section 11A of the Central Excise Act for such amounts, the penalties imposed under Rule 12 of the Cenvat Credit Rules, 2002 were deemed incorrect. The Tribunal agreed with the first appellate authority's decision to set aside the penalties imposed by the adjudicating authority.

In conclusion, the Tribunal held that the impugned order was correct and legal, without any infirmity, and rejected the appeal filed by the Revenue.