2009 (10) TMI 300 - AT - Central Excise

Tribunal rules no penalty for appellant due to lack of intent to evade duty.

The Tribunal held that no penalty was imposable on the appellant under Rule 25 of the Central Excise Rules, 2002, or Rule 15 of the Cenvat Credit Rules, ... Penalty- The assessee is engaged in the manufacture of excisable goods viz. BOPP films and also availing Cenvat credit on the inputs as well as capital goods under Cenvat Credit Rules, 2004. Inputs removed as such. Non-reversal of 4% Spl. CVD Credit. Submission made by the assessee that mistake bonafide and credit of duty paid by them available to sister unit, hence revenue neutral situation. Commissioner (Appeals) in impugned order imposed penalty under Rule 15. Held that- penalty under Rule 15 not imposable as there is no such provision. Penalty under Rule 25 cannot be imposed as goods not liable for confiscation. Penalty under Rule 15 of Cenvat Credit Rule, 2004 read with section 11AC of Central Excise Act, 1944 not imposable in absence of intention to evade being a revenue neutral situation. Penalty not imposable. Issues:1. Imposition of penalty under Rule 15 of the Central Excise Rules, 2002 on the appellant.2. Enhancement of penalty by the Revenue to the equivalent amount of duty.3. Availment of Cenvat credit on imported inputs/capital goods.4. Non-reversal of Cenvat credit on Addl. Duty (import) @ 4% at the time of clearance of imported inputs.5. Interpretation of penalty provisions under Rule 15 of the Central Excise Rules, 2002, Rule 25 of the Central Excise Rules, and Rule 15 of the Cenvat Credit Rules, 2004.6. Determination of intention to evade payment of duty and revenue neutrality in the case.Analysis:1. The appellant, engaged in the manufacture of excisable goods, filed an appeal against a penalty imposed under Rule 15 of the Central Excise Rules, 2002. The Revenue also filed an appeal seeking enhancement of the penalty to the equivalent amount of duty. The appellant availed Cenvat credit on imported inputs/capital goods, including Addl. Duty (import) @ 4%, but failed to reverse this credit at the time of clearance of imported inputs, leading to less reversal of Cenvat credit.2. The Deputy Commissioner and the lower Appellate Authority found that while there was no manifest intent to evade duty, the appellant wrongly availed Cenvat credit, resulting in the imposition of a penalty of Rs. 50,000 under Rule 15 of the Central Excise Rules, 2002. The Revenue contended that suppression of facts warranted an equivalent penalty.3. The appellant argued that no penalty could be imposed under Rule 15 as it deals with 'Special Procedure for payment of duty,' and the penalty should be imposed under Rule 25 of the Central Excise Rules. They highlighted cases where composite penalties were deemed impermissible and emphasized the absence of mens rea and revenue neutrality in their case.4. The Revenue maintained that the appellant suppressed facts by not reversing the Cenvat credit at the time of clearance, justifying the imposition of an equivalent penalty under Section 11AC. They cited precedents where penalties were confirmed based on misdeclaration or suppression due to lack of document submission.5. The judgment clarified that while the penalty under Rule 15 of the Central Excise Rules, 2002 was not applicable, penalties could be imposed under Rule 15 of the Cenvat Credit Rules, 2004 for wrongly availing Cenvat credit with an intention to evade duty. However, in this case, the situation was deemed revenue neutral, and there was no intent to evade duty, making Section 11AC inapplicable.6. Ultimately, the Tribunal held that no penalty was imposable on the appellant under Rule 25 of the Central Excise Rules, 2002, or Rule 15 of the Cenvat Credit Rules, 2004, as there was no intention to evade duty. The appeal by the appellant was allowed, and the Revenue's appeal was dismissed, emphasizing the absence of intent to evade duty in the circumstances of the case.