2011 (8) TMI 984 - AT - Central Excise

Waiver of pre deposit - Penalty - Held that - I have not found prima facie case for the appellant/applicant against either of the penalties. During the period from November 2008 to May 2009, they had not paid any amount of duty as per the Rules, but, in their returns, they stated that duty was paid in cash. Prima facie, they mis-represented a crucial fact in the statutory returns. This mis-representation cannot be held to have been made without intent to evade payment of duty. This mis-representation is no different from mis-statement of fact with intent to evade payment of duty , which is one of the grounds under Section 11AC for mandatory penalty. Irregular utilization of CENVAT credit in violation of Rule 8(3A) ibid is a fact not in dispute. The amount of duty paid by way of such irregular availment of CENVAT credit has been demanded with interest under Rule 14 of the CENVAT Credit Rules, 2004. On a perusal of the text of the Rule shows that interest is leviable on an amount of duty paid by irregular availment/utilization of CENVAT credit. Wrong utilization of CENVAT credit virtually created a situation of short-payment of duty on excisable goods. It would thus appear that the CENVAT credit in question was utilized irregularly in violation of Rule 8(3A) of the Central Excise Rules, 2002 with intent to evade payment of duty on excisable goods - Conditional stay granted.

Summary

Issues:
- Waiver of pre-deposit and stay of recovery sought by the appellant in relation to duty and penalty imposed for irregular utilization of CENVAT credit.
- Imposition of mandatory penalties under Section 11AC and Rule 15(2) of the CENVAT Credit Rules, 2004.

Analysis:
The appellant filed an application seeking waiver of pre-deposit and stay of recovery concerning a duty of Rs. 4,93,408/- and an equal penalty amount. The duty comprised two parts: Rs. 3,23,643/- for the period from November 2008 to May 2009 and Rs. 1,69,765/- for a subsequent period. The appellant had paid the first part of the duty with interest in June and July 2009, which was appropriated towards the demand. However, they utilized CENVAT credit beyond the permissible period, leading to the demand for the second part of the duty. Penalties were imposed under Section 11AC and Rule 15(2) of the CENVAT Credit Rules, 2004, against which the appeal and stay application were primarily directed.

Upon hearing both parties, the judge found no prima facie case for the appellant against either penalty. The appellant had misrepresented the payment of duty in their returns for the period from November 2008 to May 2009, indicating a crucial misrepresentation with intent to evade duty payment. Additionally, irregular utilization of CENVAT credit after May 2009 was established, leading to the imposition of penalties under relevant rules. The misrepresentation in returns and wrongful utilization of CENVAT credit were deemed intentional acts to evade duty payment, justifying the penalties imposed.

The appellant did not cite financial hardships in their application, although leniency was requested through their counsel. Considering all aspects of the case, the judge directed the appellant to pre-deposit Rs. 3,00,000/- within four weeks under Section 35F of the Central Excise Act, with compliance to be reported by a specified date. Upon compliance, waiver of pre-deposit and stay of recovery was granted for the remaining amount, subject to the specified conditions.

In conclusion, the judgment upheld the penalties imposed on the appellant for misrepresentation and irregular utilization of CENVAT credit, while also providing a directive for pre-deposit and stay of recovery based on the appellant's compliance with the specified conditions.