2018 (5) TMI 870 - AT - Central Excise

Penalty u/r 15 (1) of CENVAT credit rules - credit reversed alongwith interest - Held that - since the entire amount has been reversed along with interest before issuance of Show Cause Notice, provisions of Section 11A (2B) of CEA 1944 would get attracted - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against imposition of penalty under Rule 15(1) of CENVAT Credit Rules 2004.

Analysis:
The appellant contested the penalty imposed under Rule 15(1) of CENVAT Credit Rules 2004. The appellant, a manufacturer of battery-operated electric two-wheelers, availed CENVAT credit of duty paid inputs. Following a notification exempting electrically operated vehicles from duty payment, the appellant cleared final products under this exemption. Prior to the notification, the final products were dutiable. Upon being informed by visiting Officers, the appellant reversed the CENVAT credit related to the manufacture of battery-operated vehicles and the stock of goods/inputs. They sought relief under Section 11A(2B) of the Central Excise Act, 1944, to avoid penalty. Show cause notices were issued for demand confirmation, interest, and penalty imposition. The adjudicating authority confirmed the demands, imposed penalties, and appropriated the amounts paid.

Upon review, the Tribunal acknowledged that the entire amount had been reversed with interest before the Show Cause Notice issuance. Referring to legal precedents like Adecco Flexione Workforce Solutions Limited, Pushpadeep Enterprises, and Tejas Agency, the Tribunal noted that the law was settled on this issue. Citing the judgment in Jon Deere India Pvt. Ltd, the Tribunal found the penalty imposition unsustainable under Rule 15(1) of CENVAT Credit Rules 2004. Consequently, the Tribunal set aside the penalty of ?5.00 lakhs and allowed the appeal on this ground. However, the Tribunal upheld the demand confirmation along with interest as per the impugned order.

In conclusion, the Tribunal ruled in favor of the appellant by setting aside the penalty imposed under Rule 15(1) of CENVAT Credit Rules 2004. The appeal was allowed concerning the penalty, while the demand confirmation with interest was upheld. The decision was pronounced in open court on 25.04.2018.