2012 (2) TMI 430 - AT - Central Excise

Denial of CENVAT Credit - Cenvat credit on outward freight - Held that - The period involved in this case is from April 2008 to September 2008. Both sides agree that there is no challenge to the demand confirmed in this case. I find that provisions of the ingredients of suppression of facts etc. envisaged under proviso to Section 11A and under Section 11AC have not been invoked in this case. I also find force in the contention of the appellants that they were under bona fide belief that the provisions relating to credit on outward freight was not clear and they have availed the credit only under bona fide belief and the matter relates to interpretation of law. Therefore penalty is not imposable under Section 11AC of Central Excise Act 1944 and Rule 15 of Cenvat Credit Rules 2004 - Decided in favour of assessee.

Summary

Issues:
- Appeal against Commissioner (Appeals)'s order
- Availment of Cenvat credit on outward freight
- Confusion regarding the availability of Cenvat credit
- Interpretation of law on Cenvat credit
- Imposition of penalty under Section 11AC

Analysis:
1. The appellant filed an appeal against the Commissioner (Appeals)'s order, which dismissed the appellant's appeal. The case involved the appellant, engaged in manufacturing hydraulic cylinders and other goods, availing Cenvat credit on outward freight under specific headings of the Central Excise Tariff Act, 1985.

2. The department initiated proceedings against the appellant, contending that Cenvat credit on outward freight was not available. The lower adjudicating authority dropped the demand for a certain period but confirmed it for the remaining period, imposing a penalty. The appellant challenged this before the Commissioner (Appeals), who upheld the decision, leading to the current appeal.

3. The appellant argued that there was confusion regarding the availability of Cenvat credit on outward transport, specifically whether it was available from the place of removal or up to the place of removal. The appellant cited an amendment in the law and a decision by the Hon'ble High Court of Karnataka to support their contention. They claimed that the demand was raised for a normal period without any suppression of facts, making the penalty imposition unjustified under Section 11AC and Rule 15 of the Cenvat Credit Rules, 2004.

4. The Assistant Commissioner representing the department reiterated the findings of the Commissioner (Appeals) during the proceedings. However, upon perusing the records and considering the submissions from both sides, the judge found that the period in question was from April, 2008 to September, 2008. It was acknowledged that there was no challenge to the confirmed demand. Importantly, the judge noted that the provisions for invoking suppression of facts under Section 11A and Section 11AC were not applicable in this case.

5. The judge agreed with the appellant's argument that they had acted under a bona fide belief regarding the unclear provisions related to credit on outward freight. As the matter primarily concerned the interpretation of the law, the imposition of a penalty under Section 11AC of the Central Excise Act, 1944, and Rule 15 of the Cenvat Credit Rules, 2004, was deemed inappropriate. Consequently, the Commissioner (Appeals)'s order was set aside, and the appeal was allowed in favor of the appellant.