Wrong CENVAT credit penalties hinge on Rule 13(1) where no duty is determined and no goods are manufactured.

Wrong availment and passing on of inadmissible CENVAT credit through a bogus unit for fraudulent export rebate claims was held to attract penalty under Rule 13(1), not Section 11AC, because no duty had been determined under Section 11A(2) and no excisable goods were actually manufactured. On those facts, the adjudicating authority correctly treated the contravention as one of wrongful credit availment and applied the minimum penalty under Rule 13(1); penalty under Section 11AC, Rule 15(1) and Rule 26 was found inapplicable to the other noticees, while Rule 27 was held appropriate for the proprietary and partnership concerns. The Revenue's challenge to penalty adequacy failed.

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Issues: Whether the penalty imposed on the assessee and other noticees was inadequate, and whether the adjudicating authority was justified in imposing penalty under Rule 13(1) of the Central Excise Rules, 2002 and Rule 27 of the Central Excise Rules, 2002 instead of invoking Section 11AC of the Central Excise Act, 1944 and the corresponding CENVAT Credit Rules.

Analysis: The available material showed that the assessee was a bogus unit created to avail and pass on inadmissible CENVAT credit for fraudulent rebate claims on exports. The adjudicating authority had found that the credit was wrongly taken and that no excisable goods had in fact been manufactured, so the case did not attract penalty under Section 11AC as no duty had been determined under Section 11A(2). On the facts alleged in the show-cause notice, the contravention was held to fall within Rule 13(1), which deals with wrong availment of credit and permits a minimum penalty of Rs. 10,000. The authority also found that penalty under Section 11AC, Rule 15(1) and Rule 26 was not attracted for the other noticees, but penalty under Rule 27 was appropriate for the proprietary and partnership concerns involved.

Conclusion: The Revenue's challenge to the adequacy of penalty failed, and the findings of the adjudicating authority on the applicable penalty provisions were affirmed.

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