2009 (4) TMI 624 - AT - Central Excise

Appeal allowed, stay application disposed. Clarification on Cenvat credit rules and penalties. Denial and penalties set aside.

GEMSYNTH RESINS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, RAIGAD

The appeal was allowed, and the stay extension application was disposed of. The judgment clarified the correct application of Cenvat credit rules and ... Cenvat/Modvat - Documents for availing credit - Penalty - Cenvat/Modvat, irregular availment Issues:1. Denial of Cenvat credit of Rs. 43,200 and penalty for the period November 2000 to May 2001.2. Validity of denial of Cenvat credit of Rs. 19,520 twice.3. Imposition of penalty under Rule 57AH read with Rule 173Q.4. Applicability of penalty provisions and setting aside of the penalty.Issue 1: The appeal was against the denial of Cenvat credit of Rs. 43,200 and an equal amount of penalty for the period November 2000 to May 2001. The lower appellate authority had denied the credit on the basis that the original invoice was not produced by the assessee. However, the appellant produced the original invoice, which matched the details on the xerox copy of the invoice. It was found that the credit was taken based on the original invoice, not the xerox copy. The appellate tribunal held that the denial of Cenvat credit of Rs. 19,520 twice to the assessee was unsustainable.Issue 2: The denial of Cenvat credit of Rs. 19,520 twice was examined in detail. The appellant had taken the credit based on the original invoice, which was supported by records. The lower appellate authority's observation that the credit was taken on the strength of a xerox copy of the invoice was found to be incorrect. The tribunal noted that the allegation that the credit was taken in November 2000 was rebutted by the appellants based on statutory records. Ultimately, it was held that the denial of Cenvat credit of Rs. 19,520 twice was unsustainable.Issue 3: The imposition of a penalty under Rule 57AH read with Rule 173Q was challenged. The original authority and the appellate authority had imposed and maintained the penalty, albeit reducing its quantum. However, on a perusal of Rule 57AH, it was found that none of the ingredients for a penalty under this rule were present in the case. The lower authorities had imposed a composite penalty without proper application of mind or legal basis. Consequently, the entire penalty was set aside.Issue 4: The applicability of penalty provisions was crucial in this case. Rule 57AH was found not to be applicable as the necessary elements for imposing a penalty under this rule were absent. The lower authorities' decision to impose a composite penalty without proper legal reasoning was deemed incorrect. Therefore, the penalty was set aside entirely, as it was not justified under the relevant legal provisions.In conclusion, the appeal was allowed, and the stay extension application was disposed of. The judgment clarified the correct application of Cenvat credit rules and penalty provisions, ensuring that decisions were made based on legal principles and evidence presented during the proceedings.