Cenvat credit penalty and confiscation remanded for fresh consideration while undisputed duty demand was sustained

Duty liability for non-reversal of Cenvat credit on inputs in stock was undisputed, so the demand was sustained. The penalty and confiscation directions, however, were set aside because the plea that RT-12 returns had been filed and that the ingredients for penalty under Section 11AC were absent had not been examined by the lower authorities. The objection to confiscation also required fresh factual consideration. The matter was remanded to the Original Authority for de novo examination limited to penalty and confiscation, while the duty demand remained confirmed.

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Issues: Whether the penalty and confiscation directions could stand without examination of the plea that there was no suppression of facts and whether the matter required remand, while the duty demand remained unchallenged.

Analysis: The duty liability arising from non-reversal of Cenvat credit on inputs in stock was not disputed, so the demand was sustained. However, the plea that the relevant RT-12 returns had been filed and that the ingredients for penalty under Section 11AC were absent had not been examined by the lower authorities. The objection to confiscation also required reconsideration on the facts newly relied upon. Since these grounds were treated as legal and material to the levy of penalty and confiscation, fresh examination by the Original Authority was necessary.

Conclusion: The duty demand was confirmed, but the penalty and confiscation orders were set aside and the matter was remanded for de novo consideration on those issues.

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