2015 (4) TMI 1079 - AT - Central Excise

Tribunal drops penalty for inadmissible Cenvat Credit, emphasizing clarity in penalty imposition

C.C.E. Delhi-III Versus Shri Raj Kumar

The Tribunal ruled in favor of the respondent, holding that the penalty for allegedly receiving inadmissible Cenvat Credit should be dropped due to the ... Penalty imposed - whether M/s. Satya Metal, Jammu has passed inadmissible Cenvat Credit or not is in dispute? - Held that:- When the issue of M/s. Satya Metal has passed inadmissible Cenvat Credit to the respondent is in dispute. Therefore, no penalty was required to be imposed by the Adjudicating Authority itself and show cause notice could have been kept in abeyance. But in over enthusiasm penalty has been imposed on the respondent by the Adjudicating Authority which has been considered by the Ld. Commissioner (A) in the impugned order and same has been set aside and now again in over enthusiasm that order has been challenged before me before attaining finality the issue of inadmissible credit passed by M/s. Satya Metal, Jammu. - Decided in favour of assessee Issues:- Appeal against dropping of penalty by Ld. Commissioner (A) on the respondent for alleged inadmissible Cenvat Credit passed by M/s. Satya Metal, Jammu.Analysis:1. The appeal was filed by the Revenue against the order of the Ld. Commissioner (A) dropping the penalty imposed on the respondent for allegedly receiving inadmissible Cenvat Credit from M/s. Satya Metal, Jammu. The respondent, a second stage dealer, procured goods from M/s. All India Metal Traders, who in turn procured goods from M/s. Satya Metals in Jammu. The respondent cleared the goods to M/s. All India Metal Traders in Delhi after paying duty under notification No. 56/2002. The issue arose when it was alleged that M/s. Satya Metal, Jammu had passed inadmissible Cenvat Credit to the first stage dealer, leading to a show cause notice against the respondent for penalty under Rule 26 of the Central Excise Rules 2002.2. The Ld. Commissioner (A) held that since the proceedings against M/s. Satya Metal, Jammu had not reached finality, the penalty on the respondent was not warranted. The Revenue, however, contended that the penalty should not have been dropped as the inadmissible Cenvat Credit had been passed on. The Tribunal, after hearing the arguments, noted that the crucial issue of whether M/s. Satya Metal, Jammu had indeed passed inadmissible Cenvat Credit was still in dispute. Therefore, the imposition of penalty by the Adjudicating Authority was premature, and the show cause notice could have been kept in abeyance until the matter with M/s. Satya Metal was resolved.3. The Tribunal found that the penalty imposed on the respondent was unjustified and upheld the decision of the Ld. Commissioner (A) to set it aside. The Tribunal emphasized that in the absence of clarity regarding the inadmissible credit passed by M/s. Satya Metal, Jammu, penalizing the respondent was unwarranted. The Tribunal concluded that the appeal by the Revenue lacked merit and dismissed it, affirming the decision to drop the penalty against the respondent.In summary, the Tribunal ruled in favor of the respondent, holding that the penalty for allegedly receiving inadmissible Cenvat Credit should be dropped due to the unresolved dispute regarding the actions of M/s. Satya Metal, Jammu. The decision highlighted the importance of clarity in such matters before imposing penalties and upheld the order of the Ld. Commissioner (A) in setting aside the penalty.