2012 (2) TMI 430 - AT - Central Excise

Appeal allowed due to confusion on Cenvat credit with no suppression of facts

The appeal was allowed in favor of the appellant as the confusion regarding the availability of Cenvat credit on outward freight, coupled with the ... Cenvat credit on outward freight - Penalty under Section 11AC of the Central Excise Act, 1944 - Rule 15 of the Cenvat Credit Rules, 2004 - Proviso to Section 11A - suppression of facts - Bona fide belief and interpretation of lawPenalty under Section 11AC of the Central Excise Act, 1944 - Rule 15 of the Cenvat Credit Rules, 2004 - Bona fide belief and interpretation of law - Proviso to Section 11A - suppression of facts - Cenvat credit on outward freight - Whether penalty under Section 11AC and Rule 15 is imposable for availing Cenvat credit on outward freight for the period April, 2008 to September, 2008 when claim was made under a bona fide belief amid uncertainty in law. - HELD THAT: - The Tribunal noted that the confirmed demand for the period is not under challenge but the imposition of penalty was contested. The Court found that the ingredients of suppression of facts envisaged by the proviso to Section 11A and Section 11AC were not invoked or established. The appellants had availed Cenvat credit on outward freight while there was genuine uncertainty about whether credit extended from place of removal or up to place of removal; this raised a question of interpretation of law. In view of the bona fide belief of the assessee and that the controversy concerned interpretation rather than deliberate concealment or suppression, the Tribunal held that penalty under Section 11AC and Rule 15 could not be imposed. The Tribunal therefore set aside the penalty imposed by the Commissioner (Appeals). [Paras 6]Penalty imposed under Section 11AC and Rule 15 is not sustainable and is set aside; appeal allowed to that extent.Final Conclusion: The Tribunal allowed the appeal insofar as it set aside the penalty imposed for availing Cenvat credit on outward freight for April, 2008 to September, 2008, holding that penalty under Section 11AC and Rule 15 was not imposable in view of the assessee's bona fide belief and the interpretative nature of the dispute. Issues:- Appeal against Commissioner (Appeals)'s order- Availment of Cenvat credit on outward freight- Confusion regarding the availability of Cenvat credit- Interpretation of law on Cenvat credit- Imposition of penalty under Section 11ACAnalysis:1. The appellant filed an appeal against the Commissioner (Appeals)'s order, which dismissed the appellant's appeal. The case involved the appellant, engaged in manufacturing hydraulic cylinders and other goods, availing Cenvat credit on outward freight under specific headings of the Central Excise Tariff Act, 1985.2. The department initiated proceedings against the appellant, contending that Cenvat credit on outward freight was not available. The lower adjudicating authority dropped the demand for a certain period but confirmed it for the remaining period, imposing a penalty. The appellant challenged this before the Commissioner (Appeals), who upheld the decision, leading to the current appeal.3. The appellant argued that there was confusion regarding the availability of Cenvat credit on outward transport, specifically whether it was available from the place of removal or up to the place of removal. The appellant cited an amendment in the law and a decision by the Hon'ble High Court of Karnataka to support their contention. They claimed that the demand was raised for a normal period without any suppression of facts, making the penalty imposition unjustified under Section 11AC and Rule 15 of the Cenvat Credit Rules, 2004.4. The Assistant Commissioner representing the department reiterated the findings of the Commissioner (Appeals) during the proceedings. However, upon perusing the records and considering the submissions from both sides, the judge found that the period in question was from April, 2008 to September, 2008. It was acknowledged that there was no challenge to the confirmed demand. Importantly, the judge noted that the provisions for invoking suppression of facts under Section 11A and Section 11AC were not applicable in this case.5. The judge agreed with the appellant's argument that they had acted under a bona fide belief regarding the unclear provisions related to credit on outward freight. As the matter primarily concerned the interpretation of the law, the imposition of a penalty under Section 11AC of the Central Excise Act, 1944, and Rule 15 of the Cenvat Credit Rules, 2004, was deemed inappropriate. Consequently, the Commissioner (Appeals)'s order was set aside, and the appeal was allowed in favor of the appellant.