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PJ/Case Law/2013-14/1701

Penalty not imposable when the issue requires interpretation of law.

Case:-U.T.LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-V

Citation:-2013(294) E.L.T. 110(Tri.-Kolkata)

Brief Facts:-Appellant filed this appeal against Commissioner (Appeals)'s order No. 11/Kol-V/2011, dated 31-1-2011 whereby Commissioner (Appeal) had dis­missed the appeal filed by the appellant.

Briefly stated the facts of the case are that appellants are engaged in the manufacture of Hydraulic cylinders, Hydraulic Tipping Gears, etc., under Headings 84.12, 84.25 and 84.31 of Central Excise Tariff Act, 1985. They availed Cenvat credit on outward freight for the period January, 2008 to September, 2008. The department initiated proceedings against them on the ground that Cenvat credit on outward freight is not available. Lower adjudicating authority dropped the demand for period from January, 2008 to March, 2008 and con­firmed the demand for the remaining period and also imposed equal amount of penalty Rs. 73,664/- (Rupees Seventy Three Thousand Six Hundred and Sixty Four only). The appellant challenged this before ld. Commissioner (Appeals) who has in turn dismissed the appeal filed by the appellant. Aggrieved by the same appellants are in appeal.

Appellant Contentions:-The appellant submitted that regarding Cenvat credit there was a confusion that whether Cenvat credit on outward transport is available from the place of removal or up to place of removal. Thereafter law was also amended and the Hon'ble High Court of Karnataka in the case of Commr. of Cen­tral Excise & Service Tax, Bangalore v. A.B.B. Ltd. - 2011-TIOL-395-HC-KAR-ST = 2011 (23) S.T.R. 97 (Kar.) has now decided the case that for the CENVAT availed prior to 1-4-2008 the provisions of law applicable at the material time will prevail and for the subsequent period the cases have to be decided on their merits. The contention is that the demand has been raised for normal period and there are no ingredients of suppression of facts etc. as envisaged under proviso to Section 11A and Section 11AC of Central Excise Act, 1944. The contention is that the matter relating to interpretation of law therefore penalty is not imposable under Section 11AC and under Rule 15 of Cenvat credit Rules, 2004.

Respondent Contentions:-Ld. A.R. (Asstt. Commr.) appearing for the department reiterated the findings of the ld. Commissioner (Appeals).

Reasoning of Judgment:-We have considered the submission from both the parties and perused the record, we find that the pe­riod involved in this case is from April, 2008 to September, 2008. Both sides agree that there is no challenge to the demand confirmed in this case. Tribunal finds that provi­sions of the ingredients of suppression of facts, etc., envisaged under proviso to Section 11A and under Section 11AC have not been invoked in this case. Tribunal also finds force in the contention of the appellants that they were under bona fide belief that the provisions relating to credit on outward freight was not clear and they have availed the credit only under bona fide belief and the matter relates to inter­pretation of law. Therefore penalty is not imposable under Section 11AC of Cen­tral Excise Act, 1944 and Rule 15 of Cenvat Credit Rules, 2004. In these circum­stances ld. Commissioner (Appeals)'s order is not sustainable so far as imposi­tion of penalty is concerned. Accordingly the same is set aside and appeal is al­lowed.

Decision:-The appeal is allowed.

Comment:-The crux of this case is that as the ingredients of suppression of facts, etc., envisaged under proviso to Section 11A and under Section 11AC have not been invoked and the appellant were under bona fide belief that credit on outward freight was admissible and as the matter relates to interpretation of law, penalty is not imposable on the appellant.

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