2012 (12) TMI 532

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....availed and imposing penalty of Rs. 2,16,154/-. 2. The facts relevant for disposal of this appeal are that the appellant is engaged in the manufacture of VP Sugar, Molasses, Fusel Oil and Denatured/Rectified Alcohol/Ethanol falling under Tariff Heading 1701, 1703, 3824 & 2207 of the Schedule to Central Excise Tariff Act, 1985. The appellant is also availing Cenvat credit facility under Cenvat Credit Rules, 2004. Out of the products manufactured by the appellant Rectified Spirit is an exempted product from payment of duty. The appellant was not maintaining separate account of inputs or input services used for or in relation to manufacture of exempted product. During the course of audit it was found that for the period January, 2008 t....

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....nder Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. 3. Learned Shri Mayank Garg, Advocate for the appellant pleaded that the adjudicating authority and also the appellate authority have imposed penalty on the appellant on incorrect interpretation of Rule 15(2) of the Cenvat Credit Rules, 2004. He later on gone through Rule 15(2) and pointed out that this rule is not applicable in the cases of wrong availment of Cenvat credit in relation to "Input Services". Thus impugned order imposing penalty is not sustainable and liable to be set aside. 4. Shri Bharat Bushan, learned DR on the other hand argued in favour of the impugned order. He has drawn our attention to Rule 15(4) of Cenvat Cre....

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....the Finance Act or of the rules made thereunder with intention to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of section 78 of the Finance Act." 8. In the instant case penalty has been imposed on the appellant under Rule 15(2) of Cenvat Credit Rules, 2004 read with section 11AC of the Central Excise Act. On reading of Rule 15(2) reproduced above it is evident that this rule is applicable only in respect of Cenvat credit wrongly availed oby the assessee in relation to "Inputs" or "Capital Goods". This rule does not apply to wrong availment of Cenvat credit in relation to "Input Service". 9. Case of Revenue is that the appellant wrongly avail....