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2018 (6) TMI 235 - AT - Central ExcisePenalty u/s 11AC of CEA, 1944 - trading activity of bought out items - CENVAT credit in respect of common input service - The case of the department is that the appellant was supposed to reverse the CENVAT credit under Rule (3A) of the CCR 2004 attributed to the trading activity being an exempted service - applicability of Rule 14 - Held that - As per Rule 6(3A), it can be seen that the only requirement is to pay the proportionate cenvat credit along with interest @ 24%. There is no provision for imposition of penalty. Rule 14 is applicable only in case where the cenvat credit is wrongly taken and utilized. In the present case, it is not a case of wrong availment/utilization of cenvat credit but the demand under Rule 6(3A). Therefore, Rule 14 is not applicable - there is no specific provision unlike in the case of duty evasion or wrong availment of credit for imposition of penalty under Section 11AC. Revenue relied upon the case of Bajaj Hindustan Ltd. 2013 (3) TMI 365 - ALLAHABAD HIGH COURT , where the issue was that the appellant had wrongly availed the CENVAT credit - the case is entirely different and do not apply to the present case. The penalty was wrongly imposed under Section 11AC - appeal allowed - decided in favor of appellant.
Issues:
Waiver of penalty under Section 11AC of the Central Excise Act, 1944 for availing cenvat credit on common input service used for trading activity deemed as an exempted service. Analysis: The appellant appealed for the waiver of penalty imposed under Section 11AC for availing cenvat credit on common input service used for both manufacturing excisable goods and trading boughtout items. The department contended that the appellant should reverse the cenvat credit attributed to the trading activity being an exempted service under Rule 3A of the Cenvat Credit Rules, 2004. The penalty was imposed along with the demand for cenvat credit, which was confirmed by the Commissioner (Appeals) leading to the appeal. The appellant argued that they were unaware of the trading activity being exempted from 1.4.2012 and continued their practice pre-2012 without any intention to evade duty. They highlighted that Rule 6(3A) does not provide for penalty, and penalty under Section 11AC is not applicable as it is not a case of wrong availment of credit. They also cited various judgments supporting their stance. The appellant maintained proper records of trading activity and cenvat credit, reducing the penalty to 50% under Section 11AC(1B) as the case was based on records. The Revenue reiterated the impugned order and relied on judgments supporting the penalty imposition. The Tribunal analyzed Rule 6(3A) of the Cenvat Credit Rules, which mandates payment of proportionate cenvat credit with interest but lacks a provision for penalty. Rule 14, dealing with recovery of wrongly taken or erroneously refunded cenvat credit, does not apply to cases like the present one. The Tribunal emphasized that the penalty under Section 11AC is not warranted as it is not a case of wrong availment/utilization of cenvat credit but a demand under Rule 6(3A). The judgments cited by the Revenue involved different issues like wrongful availment of credit or differential duty, unlike the present case. Therefore, the Tribunal concluded that the penalty imposed under Section 11AC was incorrect and set it aside, allowing the appeal. In summary, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Section 11AC as the case did not involve wrong availment of credit but a demand under Rule 6(3A) of the Cenvat Credit Rules. The judgment highlighted the absence of a specific provision for penalty in such cases and distinguished previous judgments that dealt with different issues. The appellant's lack of mala fide intent, reliance on proper records, and the absence of penalty provisions under relevant rules supported the decision to waive the penalty.
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