2015 (10) TMI 1235 - AT - Central Excise

Appellant's Challenge on Interest and Penalty Upheld; Penalty Reduced, Interest Demanded

The appellant contested the demand of interest and penalty for not maintaining separate accounts for dutiable and exempted final products, as well as the ... Denial of Exemption claim - Non maintenance of separate account - Rule 6(2) of Cenvat Credit Rules 2004 - Held that:- During the intervening period they were having sufficient balance in their Cenvat Credit account to meet the liability of duty confirmed by way of adjudication order. If it is so then interest is not payable by the appellant as held by the Hon'ble High Court of Karnataka in the case of Bill Forge Pvt. Ltd. (2011 (4) TMI 969 - KARNATAKA HIGH COURT). Therefore, demand and interest is set aside. The contention of the appellant that they have not paid the amount of 10% of the value of exempted final product and taken Cenvat Credit twice wrongly under bonafide belief is not acceptable as appellant are manufacturing excisable goods and when they are clearing exempted final product from their factory they are required to pay 10% of the value of the said goods. These provisions are very clear. Therefore, penalty under section 11AC is rightly imposed on the appellant and same has been reduced by the Ld. Commissioner to the extent of 25% of the duty as they have paid the entire amount of duty before issuance of show cause notice. - Decided partly in favour of assessee. Issues:- Contesting demand of interest and imposition of penalty for not maintaining separate accounts for dutiable and exempted final products- Denial of Cenvat Credit availed twice- Applicability of penalty under section 11AC and interest paymentAnalysis:The appellant appealed against an order demanding interest and imposing a penalty due to the lack of separate accounts for dutiable and exempted final products. The appellant, a manufacturer, failed to maintain separate accounts for input/input services used in manufacturing both types of products, resulting in the demand for 10% of the value of exempted goods. Additionally, the appellant had taken Cenvat Credit twice. The adjudicating authority confirmed the demand of interest, imposed a penalty, and denied the Cenvat Credit. On appeal, the demand of interest was upheld, but the penalty was reduced to 25% of the duty involved.During the appeal, the appellant argued that interest should not be payable as they had sufficient balance in their Cenvat Credit account to cover the duty liability. The appellant also claimed that they were under a bonafide belief that they were not required to pay 10% of the value of exempted products and had mistakenly taken the Cenvat Credit twice. However, the tribunal held that the appellant, being a manufacturer of excisable goods, was obligated to pay 10% of the value of exempted goods, and the penalty under section 11AC was rightfully imposed. The penalty was reduced to 25% by the Ld. Commissioner since the appellant had paid the full duty before the show cause notice was issued.Ultimately, the tribunal partly allowed the appeal, setting aside the demand and interest but upholding the penalty under section 11AC due to the clear provisions regarding payment obligations for exempted goods.