2014 (2) TMI 591 - AT - Central Excise

Tribunal overturns penalty under Central Excise Act due to lack of challenge on credit reversal. Consistency and fairness upheld.

BOMBAY PAINTS LTD Versus COMMISSIONER OF CENTRAL EXCISE

The Tribunal allowed the appeal, setting aside the penalty imposed under Section 11AC of the Central Excise Act, 1944. The appellant's failure to ... Duty demand - Imposition of equivalent penalty u/s 11AC - Held that:- appellant is in appeal against the impugned order where the claim of excess reversal of credit has not been contested by the appellant before the Commissioner (Appeals). Therefore the same is not a subject matter before me. Accordingly, I reject the claim of excess reversal of the credit. Further, I find that in the case of J.K. Cement Works (2008 (12) TMI 624 - CESTAT NEW DELHI) this Tribunal has considered the issue in hand before me and in that case the goods were destroyed in the floods before the inputs could be used in manufacturing of final product and in that case also no information was given and the credit was reversed on being pointed out by the department. In that case, this Tribunal held that penalty is not imposable in such situation - Therefore, mandatory penalty under Section 11AC of the Act is not imposable on the appellant - Decided in favour of assessee. Issues:Appeal against imposition of penalty equivalent to duty under Section 11AC of the Central Excise Act, 1944 for failure to reverse credit on inputs destroyed in floods.Analysis:The appellant appealed against the penalty confirmed under Section 11AC of the Act, related to the destruction of inputs, semi-finished goods, and finished goods in floods. The appellant neither filed a claim of remission of duty nor informed the department about the destruction. The audit party highlighted that the appellant had availed credit on destroyed inputs, leading to the reversal of credit along with interest. Subsequently, a show-cause notice was issued for the penalty, which was confirmed by lower authorities. The appellant contended that they had reversed excess credit and were under a genuine belief regarding the reversal requirement. The appellant cited relevant case laws to support their argument.The Revenue opposed the appellant's contention, emphasizing the appellant's failure to inform the department about the destruction and alleging an intention to suppress facts. The Revenue referred to a specific case to support the imposition of the penalty. The appellant's failure to challenge the excess reversal of credit before the Commissioner (Appeals) was highlighted by the Revenue, questioning the maintainability of the claim at the current stage.The Tribunal, after considering the submissions and records, rejected the claim of excess reversal of credit as it was not contested before the Commissioner (Appeals). Referring to a previous case, the Tribunal held that in similar circumstances where inputs were destroyed before use, and credit was reversed upon departmental notice, no penalty was imposable. The Tribunal emphasized consistency in views to maintain faith in society and set aside the penalty imposed under Section 11AC of the Act, aligning with the precedent's decision. The appeal was allowed based on the established legal principles and factual similarity to previous cases, ensuring fairness and adherence to legal standards.