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2010 (2) TMI 539 - AT - Central Excise


Issues:
1. Liability to penal action under Rule 13 of the Cenvat Rules read with Section 11AC of the Central Excise Act, 1944 for not debiting the Cenvat credit involved on the inputs stocks before availing exemption.

Analysis:
The case involved an appeal against the order of the Commissioner (Appeals) regarding the imposition of a penalty under Rule 13(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act, 1944. The appellant, a manufacturer of PVC cotton fabrics in Himachal Pradesh, expanded their capacity by over 25% and started availing the benefit of a notification. The department contended that the appellant should have reversed the credit relating to inputs in stock, semi-finished goods, and goods lying in stock before availing the exemption. The appellant subsequently paid the entire credit amount as advised by the Department. The original authority dropped the proceedings, but the Commissioner (Appeals) imposed a penalty of Rs. 8,54,937 on the appellant.

Upon careful consideration, the Tribunal observed that the appellant switched from paying duty to availing exemption under the notification. The reversal of credit on inputs and goods in stock was paid, and the liability was not disputed. The Commissioner (Appeals) imposed the penalty based on the appellant's failure to reverse the Cenvat credit before availing the exemption. The Tribunal noted that the appellant had started availing the exemption from a specific date and only paid the credit after being informed by the department. The Tribunal found that the appellant had contravened the provisions of Rule 13 of the Cenvat Credit Rules with the intention to evade payment, leading to the imposition of the penalty.

However, the Tribunal disagreed with the imposition of the penalty, stating that the mere failure to reverse the credit and keeping silent did not constitute intentional evasion of excise duty. The Tribunal highlighted that the obligation to reverse the credit was in dispute in other cases, and the appellant's actions did not amount to suppression of relevant facts. The Tribunal concluded that the case involved the interpretation of legal provisions and reversed the order of the Commissioner (Appeals), restoring the original authority's decision. Consequently, the appeal was allowed with consequential relief as per law.

 

 

 

 

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