Proportional penalty relief in CENVAT credit and job work breaches where contraventions were proved but full penalties were excessive.

Improper availment of CENVAT credit on xerox copies of invoices was treated as an established contravention, but the Tribunal reduced the equivalent penalty because the duty-related reversals had already been made and the surrounding record did not justify the full amount. Clearance of goods for job work without the required declaration under the exemption notification was also held to be a valid penalty case, yet the penalty was reduced in light of the closure of the unit and other surrounding facts. The order was modified only on quantum, applying proportionality and the ends of justice.

---

---

Issues: (i) Whether the penalty imposed for availment of ineligible CENVAT credit on xerox copies of invoices and related credit irregularities was liable to be reduced; (ii) Whether the penalty imposed for clearance of goods under job work without the required declaration under the exemption notification was liable to be reduced.

Issue (i): Whether the penalty imposed for availment of ineligible CENVAT credit on xerox copies of invoices and related credit irregularities was liable to be reduced.

Analysis: The credit taken on xerox copies of invoices was found to be improper, and the appellant was unable to produce the original invoices or satisfactorily explain the irregular availment. At the same time, the record did not disclose detailed findings on the full circumstances of the rejected-input credit issue, and the duty-related reversals had already been made. In these circumstances, the Tribunal treated the contravention as established but considered the equivalent penalty excessive and held that the ends of justice would be met by reducing the penalty.

Conclusion: The penalty on this issue was reduced to Rs. 1,00,000, in favour of the assessee.

Issue (ii): Whether the penalty imposed for clearance of goods under job work without the required declaration under the exemption notification was liable to be reduced.

Analysis: The appellant relied on the job work notification, but was unable to produce the declaration that was required to be filed with the jurisdictional authorities. In the absence of such declaration, the contravention of the Central Excise rules was held to be made out and the penalty was justified. However, considering the closure of the unit and the surrounding facts, the Tribunal found that a reduced penalty would meet the ends of natural justice.

Conclusion: The penalty on this issue was reduced to Rs. 75,000, in favour of the assessee.

Final Conclusion: The impugned order was upheld with modification only as to quantum of penalties, and the appeal succeeded to the limited extent of reduction in penalty.

Ratio Decidendi: Where the contravention is established but the surrounding facts do not justify the full equivalent penalty, the penalty may be reduced on the basis of proportionality and the ends of justice.

---