2011 (1) TMI 893 - Commission - Central Excise

Settlement Commission - grant of immunity from fine penalty and prosecution - Assessee knowingly avails wrongs Cenvat Credit on Inputs - Held That - Assessee co-operated in the proceedings of settlement and had also paid the amount of duty along with interest. Some leniency was given and penalty exceeding 2, 50, 000 was waived.

Summary

Issues Involved:

1. Admissibility of CENVAT credit.
2. Demand of Central Excise duty and interest.
3. Imposition of fine and penalty.
4. Grant of immunity from prosecution.

Issue-wise Detailed Analysis:

1. Admissibility of CENVAT Credit:

The applicant, a manufacturer of M.S. Bars, availed CENVAT credit based on Central Excise Invoices from various Registered Dealers without physically receiving the goods. Investigations confirmed that the applicant received local material instead of the M.S. Scrap shown in the invoices, which was duty unpaid local bazaar scrap. The applicant admitted availing inadmissible CENVAT credit amounting to Rs. 35,64,586/-. The modus operandi involved receiving payments via cheques and later receiving cash after deducting a commission. The applicant voluntarily paid Rs. 35,59,167/- towards the inadmissible CENVAT Credit.

2. Demand of Central Excise Duty and Interest:

A Show Cause Notice (SCN) dated 18-5-2010 demanded the CENVAT Credit amount of Rs. 35,64,586/- under Rule 14 of the CENVAT Credit Rules 2004 read with Section 11A(1) of the Central Excise Act, 1944. Interest on the said amount was also demanded under Section 11AB of the Central Excise Act, 1944. The applicant paid the entire duty liability of Rs. 35,64,586/- and interest amounting to Rs. 4,05,988/-. The Revenue confirmed that the applicant had deposited the entire duty liability along with interest and had no objection to the settlement of the case.

3. Imposition of Fine and Penalty:

The Revenue proposed to impose a mandatory penalty equivalent to the CENVAT Credit under Section 11AC of the Central Excise Act, 1944, and also a penalty under Rule 25 of the CENVAT Credit Rules, 2002. The finished goods were proposed to be confiscated under Rule 15(1) of the CENVAT Credit Rules, 2004. The Revenue objected to granting immunity from the imposition of fine and penalty, citing fraudulent practices by the applicant. However, the applicant argued that the goods were not available for confiscation, and therefore, fine was not imposable. The Bench observed that the applicant had knowingly availed inadmissible CENVAT Credit but showed leniency due to prompt payment of duty and interest and full cooperation during proceedings. The applicant was granted immunity from payment of penalty in excess of Rs. 2,50,000/-, and the co-applicant was granted immunity from payment of penalty in excess of Rs. 25,000/-.

4. Grant of Immunity from Prosecution:

The applicant prayed for immunity from prosecution under the Central Excise Act, 1944. Considering the facts of the case, the Bench granted immunity from prosecution to the applicant.

Conclusion:

The Bench settled the case under sub-section (5) of Section 32F of the Act with the following terms and conditions:

- Central Excise Duty: Settled at Rs. 35,64,586/-, already paid by the applicant.
- Interest: Settled at Rs. 4,05,988/-, already paid by the applicant.
- Fine: Not imposed as the goods were cleared in the past unconditionally.
- Penalty: Immunity granted from payment of penalty in excess of Rs. 2,50,000/- for the applicant and Rs. 25,000/- for the co-applicant.
- Prosecution: Immunity granted from prosecution under the Act.

The immunities were granted under sub-section (1) of Section 32K of the Act, with a caution that the order would be void if obtained by fraud or misrepresentation of facts.