Tribunal Cancels Penalty for No Suppression of Facts

The tribunal set aside the penalty imposed under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC of the Central Excise Act as there was no suppression of facts or intent to evade duty. The appellant had already paid the wrongly availed credit along with interest before the show cause notice, and the tribunal found no grounds for imposing the penalty.

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Issues:
- Availment of CENVAT Credit on ineligible items
- Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC of the Central Excise Act

Analysis:

Issue 1: Availment of CENVAT Credit on ineligible items
The appellant, a manufacturer of Silico Manganese, availed CENVAT Credit of Rs. 5,34,934 on items like mill plates, MS beams, MS angles, channels, TMT bars, MS pipes, and bars for manufacturing capital goods. The department alleged that this credit was not entitled, and before the show cause notice, the appellant paid the duties and interest. The main contention was whether the appellant suppressed information by not reflecting these items in statutory returns. The appellant argued that since ER-1 returns do not require showing individual items for CENVAT Credit, there was no suppression of facts. The tribunal noted that suppression must be a positive act, and in this case, the appellant was not required to declare individual items in ER-1s. As the intention to evade payment of duty was not evident, the tribunal concluded that there was no suppression of facts.

Issue 2: Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC
The department imposed a penalty of Rs. 5,34,934 under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC. The appellant contended that since they had already paid the wrongly availed credit along with interest before the show cause notice, no penalty should be imposed. The tribunal observed that penalty under Rule 15(2) is applicable when credit is taken wrongly due to fraud, collusion, misstatement, suppression of facts, or contravention with intent to evade duty. As the intention to evade duty was not proved, and the appellant had reversed the credit before the notice, the tribunal found no grounds for imposing the penalty. The tribunal set aside the Order-in-Appeal and allowed the appeal.

In conclusion, the tribunal found that there was no suppression of facts or intent to evade duty, leading to the setting aside of the penalty imposed under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC of the Central Excise Act.

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