2016 (9) TMI 732 - AT - Central Excise

Tribunal upholds penalty for non-disclosure of irregular credit, emphasizing material facts suppression.

CCE, C & ST, Tirupati Versus M/s Amara Raja Electronics Ltd.

CCE, C & ST, Tirupati Versus M/s Amara Raja Electronics Ltd. - 2016 (341) E.L.T. 369 (Tri. - Hyd.) Issues:1. Availment of CENVAT credit on service tax group resource sharing expenses.2. Validity of invoices issued by sister concerns for shared expenses.3. Adjudication of demands and penalties by the authorities.4. Appeal against the Commissioner (Appeals) order on penalty reduction.5. Interpretation of Section 11A (2B) of the Central Excise Act, 1944.Analysis:1. The case involved the respondent availing CENVAT credit on service tax group resource sharing expenses through invoices issued by sister concerns. The department contended that these expenses were merely shared between group companies without actual services being provided, leading to the issuance of show cause notices.2. The adjudicating authority confirmed the demands raised in the show cause notices, ordering recovery of irregularly availed CENVAT credit and imposing penalties under the CENVAT Credit Rules, 2004. The Commissioner (Appeals) upheld the demands for one period but reduced the penalty for another period due to the respondent's reversal of a portion of the amount before the issuance of the show cause notice.3. The department appealed against the Commissioner (Appeals) order, arguing that since the irregular credit was availed through suppression of facts, the penalty under Section 11AC should be imposed. The issue before the tribunal was whether the reduction of penalty by the Commissioner (Appeals) was correct in law.4. The tribunal analyzed Section 11A (2B) of the Central Excise Act, 1944, which allows for voluntary payment of duty before the issuance of a show cause notice, barring cases involving fraud, collusion, or suppression of facts. The tribunal found that since the details of the irregular credit were not disclosed until verification, it constituted suppression of material facts, disqualifying the respondent from the benefits of Section 11A (2B).5. Consequently, the tribunal set aside the reduction in penalty by the Commissioner (Appeals) and upheld the imposition of penalty equal to the duty demanded by the adjudicating authority. The rest of the impugned order was left undisturbed, and the department's appeal was allowed on this specific issue.This detailed analysis highlights the procedural and legal aspects of the case, focusing on the interpretation of relevant provisions and the tribunal's decision regarding the imposition of penalties for irregularly availed CENVAT credit.