2007 (3) TMI 108 - AT - Central Excise

Tribunal upholds decision on penalty for improper credit usage

The Revenue's appeal against the setting aside of a Rs. 50,000 penalty imposed on a respondent for taking credit against capital goods was rejected by the ... Penalty not leviable where Cenvat credit is taken and utilised lawfully - utilisation restriction under Rule 4(2)(a) of the Cenvat Credit Rules, 2002 - penalty for wrongful Cenvat credit under Rule 13 read with Section 11AC of the Central Excise Act, 1944 - absence of fraud, willful mis-statement, collusion or suppression as a defence to penalty - precedent reliance: P&B Pharmaceuticals v. CCE - consistent Tribunal view in Delphi Automatic System v. CCE, NoidaPenalty not leviable where Cenvat credit is taken and utilised lawfully - penalty for wrongful Cenvat credit under Rule 13 read with Section 11AC of the Central Excise Act, 1944 - utilisation restriction under Rule 4(2)(a) of the Cenvat Credit Rules, 2002 - absence of fraud, willful mis-statement, collusion or suppression as a defence to penalty - Whether the penalty imposed under Rule 13 of the Cenvat Credit Rules, 2002 (read with Section 11AC) could be sustained where the assessee availed full credit against capital goods but utilised the credit in accordance with the restriction in Rule 4(2)(a). - HELD THAT: - The adjudicating authority imposed penalty under Rule 13 because the assessee took credit of the full amount against capital goods. The record, however, shows that the assessee utilised fifty percent of that credit in accordance with the utilisation restriction prescribed by Rule 4(2)(a) of the Cenvat Credit Rules, 2002. There was no finding of fraud, willful mis-statement, collusion or suppression of facts. The Commissioner (Appeals) set aside the penalty, applying the ratio in P&B Pharmaceuticals v. CCE and consistent Tribunal authority in Delphi Automatic System v. CCE, Noida, which hold that where credit is taken and utilised as provided by law and there is no culpable mens rea, penalty is not attracted. Absent any contrary finding of dishonest intent or fraudulent conduct, interference with the appellate order was not warranted.Penalty imposed under Rule 13 read with Section 11AC set aside; Revenue appeal rejected and Commissioner (Appeals) order affirmed.Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the Commissioner (Appeals) order setting aside the penalty because the assessee had availed and utilised the Cenvat credit in accordance with Rule 4(2)(a) and there was no finding of fraud or willful mis-statement to attract penalty under Rule 13 read with Section 11AC. The Revenue appealed against the setting aside of a penalty of Rs. 50,000 imposed on a respondent for taking credit of full amount against capital goods. The Tribunal rejected the appeal, citing that the credit was utilized in accordance with the law and no penalty was warranted for fraud or willful misstatement. The decision was based on previous rulings and upheld by the Commissioner (Appeals).