Tribunal modifies penalty under Rule 15(3) pre-amendment, limits penalty to Rs. 2000.

The Tribunal modified the penalty imposed, ruling that the appellant should be penalized under Rule 15(3) pre-amendment for availing ineligible credit on input services, limiting the penalty to Rs. 2000. The appeal was disposed of accordingly.

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Issues:
1. Availment of ineligible Cenvat credit on Service Tax paid on input services.
2. Imposition of penalty under Rule 15 of the CENVAT Credit Rules, 2004.

Analysis:

Issue 1: Availment of ineligible Cenvat credit on Service Tax paid on input services
The case involved a manufacturer of sugar and molasses who availed Cenvat credit under the Cenvat Credit Rules, 2004. The department observed that the manufacturer had a co-generation plant producing electricity, with excess power supplied to the state Electricity Board. The manufacturer failed to maintain separate accounts for input services used in manufacturing dutiable and non-dutiable goods. Consequently, a show cause notice was issued for availing ineligible credit of Service Tax on courier, clearing, forwarding, telephone, and GTA services. The adjudicating authority confirmed the demand and imposed penalties under Rule 15 of the CENVAT Credit Rules, 2004. The Commissioner (Appeals) upheld the penalty, reducing it to 25% of the amount. The appellant challenged the penalty, arguing that Rule 6 was not applicable, and the penalty should be limited to Rs. 2000 under Rule 15(3) pre-amendment.

Issue 2: Imposition of penalty under Rule 15 of the CENVAT Credit Rules, 2004
The appellant contended that the penalty imposed under Section 11AC and upheld by the Commissioner (Appeals) was excessive. The appellant's representative argued that the penalty should be governed by Rule 15(3) pre-amendment as the issue pertained to availing ineligible credit on input services. The Tribunal noted that Rule 15(2) applied to fraud or willful misstatement regarding duty on inputs or capital goods, while Rule 15(3) pertained to denial of CENVAT credit on input services. As the appellant was a manufacturer, not a service provider, Rule 15(4) was deemed inapplicable. The Tribunal set aside the penalty imposed under Section 11AC, directing the penalty to be Rs. 2000 in accordance with Rule 15(3) pre-amendment.

In conclusion, the Tribunal modified the penalty imposed, ruling that the appellant should be penalized under Rule 15(3) pre-amendment for availing ineligible credit on input services, limiting the penalty to Rs. 2000. The appeal was disposed of accordingly.

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