2017 (9) TMI 1481 - AT - Central Excise

Input/input services used in manufacture of exempt goods - violation of Rule 6 (3) (i) of the Rules, 2004 - whether invocation of Rule 15 (2) of CCR, 2004 justified? - Held that - there is no dispute that the appellant paid the amount alongwith interest which was appropriated by the Adjudicating Authority - there is no doubt that the appellant is required to fulfill the obligations under Rule 6 of the Rules, 2004, but it is required to establish the fraud, collusion, intention to evade payment of tax etc. in order to invoke penal provisions under Section 11AC of the Act, 1944 - there is no material on record of such ingredients as specified under Section 11AC of the Act, 1944 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Violation of Rule 6 (3) (i) of Cenvat Credit Rules, 2004 | Imposition of penalty under Rule 15 (2) of Rules, 2004 read with Section 11AC of the Central Excise Act, 1944

Analysis:
The appellants, engaged in manufacturing P.T. Tubes, were alleged to have contravened Rule 6 (3) (i) and Rule 6 (3) (ii) of the Cenvat Credit Rules, 2004, by not paying an amount equal to 5% of the value of exempted goods or reversing the Cenvat Credit amount used in manufacturing such goods. The Adjudicating Authority confirmed a demand of ?21,85,654 along with interest, without imposing a penalty due to the absence of malicious intent. However, the Commissioner (Appeal) allowed the department's appeal, imposed a penalty under Rule 15 (2) of the Rules, 2004, and granted an option to pay 25% of the duty as penalty. The appellant contested this decision, arguing that Rule 15 (2) cannot apply in this case and that they had reversed the amount, thus not violating the rules. Various case laws were cited in support of this argument.

The Tribunal noted that the appellant had paid the amount along with interest, which was accepted by the Adjudicating Authority. The goods were removed before an audit, and the authority found no evidence of malicious intent. However, the Commissioner (Appeal) claimed that the amount was not paid before the objection by the CERA. The Tribunal emphasized that while the appellant must comply with Rule 6 of the Rules, penal provisions under Section 11AC of the Act, 1944, require proof of fraud, collusion, or intent to evade tax, which was not established in this case. Therefore, the Tribunal disagreed with the Commissioner (Appeal) and set aside their order, restoring the Adjudicating Authority's decision. As a result, the appeal by the appellant was allowed, and the original order was upheld.