2023 (4) TMI 868 - AT - Central Excise

Levy of penalty - Recovery of wrongly availed Cenvat Credit - trading activity as well as taxable service - non-maintenance of separate records - rule 6 of Cenvat Credit Rules, 2004 (CCR, 2004) - HELD THAT - There is no denial for the fact that amount for which the demand has been confirmed is an amount of reversed Cenvat Credit and that the same was reversed much prior the issuance of Show Cause Notice. The admitted facts there seems no occasion for imposition of penalty. Further, it is observed that though the Commissioner (Appeals) in para 11 has held the suppression of facts on part of the appellant, While ordering imposition of penalty but it is also observed that in para 9 of the order itself the findings of Commissioner are as follows - (i) There is no need to maintain separate accounts w.e.f 01.04.2016. (ii) The appellant and 2/3 options during the impugned period; that they have admittedly availed the option available under Rule 6 (3) (ii) read with rule 6 (3A). (iii) The competent officer could allow a manufacturer/provider of output service who failed to exercise the option under Rule 6 (3) to follow the procedure and pay the amount referred to in Rule 6 (3) (ii) alongwith interest. The provisions of section 11AC of CEA are inapplicable to the given set of circumstances as those can be relied only in case of short payment/non-payment of the duty. Admittedly present is not the case of short payment/non-payment of duty - the Commissioner (Appeals) has wrongly imposed penalty upon the appellant. Appeal allowed in part.

Summary

Issues involved: Appeal against imposition of penalty under Section 11AC of Central Excise Act, 1944 for excess reversal of Cenvat Credit without intent to evade payment of duty.

Summary:
The appellant, engaged in manufacturing PPE medicaments, faced a show cause notice for wrongly availed Cenvat Credit of Rs. 11,39,242 as they did not maintain separate accounts for trading activity. The Commissioner (Appeals) reduced the demand and penalty, but the appellant still contested the penalty imposition. The appeal focused on whether the penalty was justified for the excess reversal of Cenvat Credit. The appellant argued that there was no intent to evade duty and the reversal was correct per Rule 6 (3) (ii) of CCR, 2004, done before the show cause notice. The Department, however, claimed suppression of facts and contravention of rules to evade duty.

The Tribunal noted that the appeal's main concern was the penalty imposition, not the merits of the case or Rule 6 applicability. It acknowledged the correct reversal of Cenvat Credit before the notice issuance. Referring to Section 11AC, the Tribunal found no grounds for penalty imposition as there was no fraud, collusion, or wilful misstatement to evade duty. The Commissioner's contradictory findings on the appellant's compliance with rules further supported setting aside the penalty. Ultimately, the Tribunal held that the penalty imposition was unjustified and set it aside, partially allowing the appeal.

[Order dictated & pronounced in the open Court]