Tribunal confirms interest on late payment, modifies penalty rule, imposes Rs. 2,000 fine.

The Tribunal confirmed the demand for interest on late payment related to wrongly availed Cenvat credit but set aside the penalty imposed under Rule 15(2) of Cenvat Credit Rules, 2004, modifying it to Rs. 2,000 under Rule 15(3).

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Issues:
1. Confirmation of demand of interest for late payment in relation to wrongly availed Cenvat credit.
2. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944.

Analysis:

Issue 1: Confirmation of demand of interest for late payment
The appellant, engaged in manufacturing various products falling under specific tariff headings, availed Cenvat credit facility under Cenvat Credit Rules, 2004. The audit revealed non-receipt of Cenvat credit for certain input services used in the manufacture of an exempted product, Rectified Spirit. Upon notice, the appellant debited the Cenvat credit amount but failed to pay interest on late payment. The department issued a show cause notice leading to the confirmation of interest demand and imposition of penalty by the Asst. Commissioner and subsequent dismissal of appeal by the Commissioner (Appeals).

Issue 2: Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004
The appellant contested the penalty imposition under Rule 15 of Cenvat Credit Rules, 2004, arguing that the penalty was based on an incorrect interpretation of the rule. The appellant's representative highlighted that Rule 15(2) does not apply to wrong availment of Cenvat credit in relation to "Input Services." The department, however, supported the penalty citing Rule 15(4) which allows penalties for fraud, wilful misstatement, collusion, or contravention of the Finance Act. The Tribunal noted that the penalty imposed under Rule 15(2) was not applicable as it pertained to "Inputs" or "Capital Goods," not "Input Services." The contention that Rule 12(4) applied was rejected as it pertains to service providers, whereas the appellant was a manufacturer. Consequently, the Tribunal set aside the penalty under Rule 15(2) and modified it to Rs. 2,000 under Rule 15(3) of Cenvat Credit Rules, 2004.

In conclusion, the Tribunal upheld the demand of interest for late payment but set aside the penalty imposed under Rule 15(2) of Cenvat Credit Rules, 2004, modifying it to Rs. 2,000 under Rule 15(3).

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