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PJ-Case law-2013/14-1596

Whether penalty is imposed under Rule 15(2) of Cenvat Credit Rules, 2004?

Case:-BALRAMPUR CHINI MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD

Citation:- 2013(30) S.T.R. 384 (Tri.-Del.)

Brief Facts:- Shri Bipin Garg, learned Counsel submits that there is already reversal of Cenvat credit of  Rs. 7,37,624/-which is apparent from page 11 of adjudication order. Considering such aspect stay application is disposed waiving requirement of pre-deposit of balance amount. Learned Counsel prays for disposal of appeal itself. There is no objection from Revenue for such disposal.

Appellant Contentions:- The Appellant contendsonly penalty of Rs. 7,73,504/- imposed under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. He submits that at the relevant point of time Rule 15(2) of Cenvat Credit Rules,2004 did not take care of input service credit, whereas sub-rule (3) of Rule 15 deals with input service. That rule does not speak of any rigorous penalty. Therefore, let there be an order to reduce the dispute directing the appellant to reverse balance amount of Cenvat Credit against the demand of Rs. 7,73,504/- as against which reversal to the extent of Rs. 7,37,624/- was made as per adjudication order and reasonable penalty may be imposed so that litigation shall come to an end.

Respondent Contentions:-The Revenue supports the order of the lower authorities.

Reasoning of Judgment:-We have considered the submission from both the parties and perused the record, We find that the appellant intends to end the litigation with the department. It has already reversed the Cenvat credit to the extent indicated in adjudication order with deposit of interest of Rs. 49,401/- as is apparent from the said order. The crucial issue is only penalty that has been imposed under Rule 15(2) of Cenvat Credit Rules, 2004. Learned Adjudicating Authority invoked Section 11AC for imposition of penalty under Rule 15(2). When this sub-rule is read, that does not bring a case of service tax issue since the input and capital goods are coverage of that sub-section. When sub-section (3) has enacted, mechanism to deal with input services which was subject matter at page 8 of the adjudication order, there is no reference to Section 11AC in that sub-section. In absence of legislative intent to invoke Section 11AC for reading sub-section (3) the adjudication order is not sustainable insofar as penalty imposed under Rule 15(2) is concerned. Appropriate sub-section is sub-section (3). It is pertinent to mention that while sub-section (2) deal with element of Section 11AC, sub-section (4) mentions about element of Section 78 of the Finance Act, 1994 for no mechanism provided in sub-rule (3) to invoke Section 11AC of Central Excise Act, 1944, nor Section 78 of the Finance Act, 1994, levy of penalty of Rs. 10,000/- shall be justified in the fitness and circumstances of the case.

Decision:- The appellant gets partial relief confirming duty and interest demand but reducing the penalty to Rs. 10,000/-.

Comment:-The crux of the case is that when the appellant has wrongly taken cenvat credit of service tax, then Rule 15(3) is applicable instead of Section 15(2), as Rule 15(2) covers only the issues related to inputs and capital goods. Further, there is no mechanism to impose penalty under section 11AC or section 78 in Rule 15(3). Therefore, as the penal provisions for section 78 are to be read with Rule 15(4) and that rule has not been invoked, reduced penalty has been imposed.

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