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2022 (12) TMI 561 - AT - Central ExciseWaiver of penalty in excess of 25% - irregularity in availing Cenvat Credit - Passing of excessive cenvat credit by the supplier - Reversal of Cenvat Credit on Inputs removed as such - the appellant is not contesting the duty or interest confirmed by the authorities below. In fact, the appellant had paid the duty and the interest along with 25% of the penalty within 30 days from receipt of the Order in Original. HELD THAT - it is clear that the appellant had paid duty along with interest and 25% of penalty on receipt of the Order in Original. The adjudicating authority has not given the option to pay 25% of the penalty in the order passed by him. - payment of 25% of the penalty amount paid by the appellant would suffice. The impugned order confirming the equal penalty is set aside without disturbing the confirmation of duty and interest. The appeal is partly allowed in above terms with consequential relief if any.
Issues Involved:
1. Denial of CENVAT credit amounting to Rs. 40,61,911/-. 2. Imposition of equal penalty under Rule 15(2) of CENVAT Credit Rules, 2004 r/w Sec. 11AC of the Central Excise Act, 1944. 3. Appellant's entitlement to pay 25% of the penalty amount under the first proviso to Sec. 11AC. Issue-wise Detailed Analysis: 1. Denial of CENVAT Credit: The appellants, engaged in manufacturing automobile parts, availed CENVAT credit on inputs, capital goods, and input services. An audit revealed that the supplier, M/s. Sungwoo Gestamp Hi-tech (Chennai) Ltd., passed on CENVAT credit using a uniform price, leading to discrepancies in the credit amounts. The supplier later issued credit notes and supplementary invoices to rectify these discrepancies. However, the appellant failed to reverse the excess credit availed, did not report this in their returns, nor sought clarification from the department. Consequently, a Show Cause Notice was issued to deny the credit of Rs. 40,61,911/- for the period from April 2012 to March 2014, along with interest and penalties. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals). 2. Imposition of Equal Penalty: The appellant contested the imposition of an equal penalty. They argued that they were not given an option to pay 25% of the penalty amount, as mandated by the first proviso to Sec. 11AC. The appellant had already paid the duty, interest, and 25% of the penalty within 30 days of receiving the Order in Original. The case hinged on whether the appellant was entitled to the reduced penalty option under Sec. 11AC. 3. Entitlement to Pay 25% of the Penalty: Section 11AC stipulates that if duty and interest are paid within 30 days from the communication of the order, the penalty payable is reduced to 25% of the duty determined. The appellant relied on the jurisdictional High Court decision in AP Steels Vs. CCE, Trichy, which supported their stance. The court held that the appellant must be given an option to pay 25% of the penalty if they pay the duty and interest within 30 days of the order. The judgment analyzed that the first proviso to Sec. 11AC operates as an exception to the main section, incentivizing prompt payment by reducing the penalty to 25%. The appellate proceedings are considered a continuation of the original proceedings, and the order attains finality only after the appellate process concludes. Thus, the option to pay a reduced penalty should be available from the date of the appellate order. Conclusion: The Tribunal, following the jurisdictional High Court's decision in AP Steels and the Delhi High Court's decision in K.P. Pouches (P) Ltd. Vs. Union of India, concluded that the appellant was entitled to pay only 25% of the penalty. The impugned order confirming the equal penalty was set aside, while the confirmation of duty and interest remained undisturbed. The appeal was partly allowed, granting consequential relief to the appellant.
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