2016 (1) TMI 819 - AT - Central Excise

Tribunal overturns penalty imposition under CEA and CENVAT rules due to lack of evidence

M/s. Ellenbarrie Industrial Gases Ltd. Versus Commissioner of Central Excise, Kolkata-III

The Tribunal allowed the appeal, setting aside the penalty imposition under Section 11AC of CEA,1944 read with Rule 13 of CENVAT Credit Rules,2002. The ... Inadmissibility of Cenvat Credit on capital goods - Penalty imposed - Held that:- Initially the claim of the appellant was that the cenvat credit would be admissible on cylinders as ‘capital goods’. Later, major portion of the demand was dropped accepting the plea of the Appellant that it is admissible as ‘inputs’. Also, on scrutiny of the de-novo order passed by the adjudicating authority as well as first appellate authority, I do not see any reasoning to support their conclusion of suppression of facts or mis-declaration, while imposing penalty under Section 11AC of CEA,1944 read with Rule 13 of CENVAT Credit Rules,2002. In absence of substantial evidence, supporting suppression of facts/ mis -declaration, in my opinion, penalty under Sec.11AC of CEA,1944 read with Rule 13 of CENVAT Credit Rules,2002 cannot be sustained. Besides, I find that the appellant had debited the credit amount within one month from the issuance of show cause notice and that they have taken the credit declaring the same as capital goods. In the result, the impugned Order confirming imposition of penalty is set aside - Decided in favour of assessee. Issues:- Admissibility of Cenvat Credit on gas cylinders as capital goods- Reduction in demand and imposition of penalty- Challenge to imposition/confirmation of penaltyAnalysis:1. The appeal was filed against an Order-in-Appeal passed by the Commissioner of Central Excise, Kolkata, regarding the admissibility of Cenvat Credit on Oxygen and Hydrogen Gas Cylinders as capital goods during 2003-2005. The Tribunal remanded the case to the adjudicating authority to consider the credit as inputs, not capital goods.2. After the remand order, the demand was reduced, and an equivalent penalty was imposed. Both the revenue and the assessee filed appeals challenging the reduction in demand and penalty imposition. The Ld. Commissioner rejected both appeals, leading to the present appeal by the assessee against the penalty imposition.3. The appellant argued that the credit was initially claimed as capital goods but allowed as inputs after the remand. The penalty imposition under Section 11AC of CEA,1944 read with Rule 13 of CENVAT Credit Rules,2002 was contested due to the lack of evidence supporting suppression of facts or mis-declaration.4. The Revenue reiterated the Ld. Commissioner's findings, but the Tribunal found that the major portion of the demand was dropped, accepting the appellant's claim that the credit was admissible as inputs. There was no substantial evidence of suppression of facts or mis-declaration to support the penalty imposition.5. The Tribunal set aside the penalty imposition as the appellant debited the credit amount within one month of the show cause notice, and there was no evidence of suppression of facts. The appeal was allowed, concluding that the penalty under Section 11AC of CEA,1944 read with Rule 13 of CENVAT Credit Rules,2002 was not sustainable in the absence of substantial evidence.