2018 (6) TMI 1480 - AT - Central Excise

Equivalent penalty u/s 11AC of the CEA and also u/r 13 of CCR 2004 - failure to pay an amount equal to 8% of the total value of exempted final goods having manufactured by availing CENVAT credit of service tax of duty / tax paid on input services and inputs and also an amount of Central Excise duty paid on the scrap generated at jobworkers premises - Held that - The provision of Section 11AC of the Central Excise Act, 1944 and Rule 13 of Central Excise Rules, 2002 were not made applicable to the demands raised for reversal of an amount equivalent to 8% of the value of the exempted goods cleared when CENVAT Credit is availed on common inputs and input services - This position of law has not been appreciated by both the lower authorities. In absence of any provision in the statute, in my opinion, imposition of penalty equivalent to the amount cannot be upheld - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Penalty imposed under Section 11AC of the Central Excise Act and Rule 13 of Cenvat Credit Rules, 2004.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI concerned the equivalent penalty imposed on the appellant under Section 11AC of the Central Excise Act and Rule 13 of Cenvat Credit Rules, 2004. The appellant was alleged to have not paid the amount equal to 8% of the total value of exempted final goods manufactured by availing CENVAT credit during a specific period. The first appellate authority upheld the penalty, stating that the appellant did not contest the demands, indicating acceptance of the duty liability. However, the Tribunal found that not contesting the demands did not necessarily imply an intention to evade payment of duty. The issue arose due to a misinterpretation of a notification granting exemption to small scale industries. The appellant, a manufacturer of power-driven pumps, had not paid the required amount due to misinterpretation of the notification's clauses. The adjudicating authority acknowledged that the appellant paid the amount upon clarification. The Tribunal noted that during the relevant period, the provisions of Section 11AC of the Central Excise Act and Rule 13 of Central Excise Rules were not applicable to demands for reversal of an amount equivalent to 8% of the value of exempted goods when CENVAT Credit is utilized on common inputs and input services. Both lower authorities failed to appreciate this legal position, leading to the Tribunal setting aside the penalty imposition based on this ground.

The Tribunal's decision highlighted the importance of correctly interpreting statutory provisions and notifications to determine the applicability of penalties under the Central Excise Act and Cenvat Credit Rules. The judgment emphasized that not contesting demands does not automatically imply an intention to evade duty payment, especially in cases of misinterpretation of legal provisions. The Tribunal's analysis focused on the specific issue of penalty imposition based on the misinterpretation of a notification granting exemption, ultimately leading to the setting aside of the penalty due to the incorrect application of penalty provisions by the lower authorities.