2012 (6) TMI 756 - AT - Central Excise

Director not liable for Cenvat credit penalty, Tribunal overturns decision

The Tribunal allowed the appeal, setting aside the penalty imposed on the Director of the company for the wrong availment of Cenvat credit. It ruled that ... Availment of Cenvat credit - penalty imposed under Rule 13 of Cenvat Credit Rules - Held that:- provisions of Rule 13 of Cenvat Credit Rules, 2002 was applicable only to the person who availed Cenvat credit and penalty under the said rule cannot be imposed on the Director of company which availed Cenvat credit wrongly - Decided in favour of assessee. Issues:Wrong availment of Cenvat credit by a company, imposition of penalty under Rule 13 of Cenvat Credit Rules on the Director of the company.Analysis:The Revenue alleged that M/s. Kundan Castings (P) Ltd. wrongly availed Cenvat credit, resulting in a confirmation of excise duty against them along with penalties. Additionally, a penalty was imposed on the Director of the company under Rule 13 of Cenvat Credit Rules. The Tribunal clarified that the matter of duty confirmed and penalty imposed on the company was not under consideration in this proceeding.The Counsel for the appellant contended that Rule 13 of Cenvat Credit Rules, 2002, which allows for penalties, cannot be applied to a Director of a company. The rule specifies that penalties can only be imposed on the person who availed the wrong Cenvat credit, which, in this case, was the company and not the Director.The Revenue's argument was that when a company commits an offense, the person in charge of the company is also accountable for the offense. To be exempt from penalties, the person must prove that the offense occurred without their knowledge. In this case, the appellant failed to demonstrate that the offense was committed without their knowledge.The Tribunal examined Rule 13 of Cenvat Credit Rules, 2002, which outlines provisions for confiscation and penalties related to the wrongful availment of Cenvat credit. The rule specifies that penalties can be imposed on the person who availed the credit wrongly. Thus, the Tribunal concluded that penalties under this rule cannot be imposed on the Director of a company that wrongly availed Cenvat credit.In its final decision, the Tribunal allowed the appeal filed by the appellant, setting aside the penalty imposed on the Director of the company. The Tribunal ruled that the provisions of Rule 13 of Cenvat Credit Rules, 2002, only apply to the person who availed the Cenvat credit wrongly, not the Director of the company. Therefore, the penalty imposed on the appellant in this case was overturned, and the appeal was allowed.