2019 (7) TMI 1606 - AT - Central Excise

Levy of penalty u/r 15 of CER and Rule 27 of CER - short payment of Central Excise Duty - Valuation of free supplies provided by the Indian Railways to the appellant done in wrongful manner - HELD THAT - The penal provisions under Rule 15 can be invoked only in the circumstances where the cenvat credit is availed wrongly or any contravention of the provisions of this Rule - in the instance case the cenvat credit has rightly been availed by the appellant which was debited wrongly. As the Central Excise duty has already been paid from PLA on the same goods and therefore we feel that its wrong on the part of the appellant to revoke the provisions of Rule 15(1). In this case we find that the adjudicating authority has erred in imposing penalty of Rs. Five lakh on the appellant under the provisions of Rule 15 (1) and therefore the same is set aside. Penalty as per the provisions of Rule 27 of the Central Excise Rules 2002 - HELD THAT - The maximum penalty which has been prescribed under Rule 27 of the Central excise Rules is only Rs. 5000/- and the adjudicating authority has erred in imposing penalty of Rs. 25, 000/- under Central Excise Rules 2002 - A penalty under Rule 27 of the Central Excise Rules 2002 reduced from Rs. 25, 000/- to Rs. 5000/- under the relevant provisions of Rule 27. Appeal allowed in part.

Summary

Issues:
1. Alleged wrongful availment of credit on input services for dutiable and exempted products.
2. Alleged short payment of Central Excise duty on clearance of wagons.
3. Valuation issue regarding free supplies provided by Indian Railways.
4. Imposition of penalties under Cenvat Credit Rules and Central Excise Rules.

Issue 1: Alleged wrongful availment of credit on input services for dutiable and exempted products:
The Department contended that the appellant had taken credit on input services for both dutiable and exempted products, not entitled to benefit under Notification No. 1/2011 CE. A show cause notice was issued for short payment of Central Excise duty. The Order in Original confirmed the allegations, leading to an appeal. The Tribunal remanded the matter for denovo adjudication. The Commissioner (Appeals) passed orders, and the appellant challenged the penalties imposed.

Issue 2: Alleged short payment of Central Excise duty on clearance of wagons:
The Department alleged short payment of Central Excise duty on wagons cleared to Railways due to incorrect valuation of free supplies by Indian Railways. The show cause notice detailed the charges, including short paid duty and interest. The matter was adjudicated, and the appellant appealed against the penalties imposed.

Issue 3: Valuation issue regarding free supplies provided by Indian Railways:
The Department raised concerns about the valuation of free supplies by Indian Railways to the appellant, leading to a show cause notice. The appeal by the Department was challenged based on the monetary limit prescribed for maintaining the appeal before the Tribunal.

Issue 4: Imposition of penalties under Cenvat Credit Rules and Central Excise Rules:
The appellant contested the penalties imposed under Rule 15(1) of Cenvat Credit Rules and Rule 27 of Central Excise Rules. The Tribunal found that the penalties were not justified as the appellant had not violated any provisions, leading to the reduction of penalties imposed.

In conclusion, the Tribunal partially allowed the appeal filed by the appellant and dismissed the appeal filed by the Department due to the monetary limit prescribed under the Litigation Policy. The penalties imposed were set aside or reduced based on the findings regarding the alleged violations of Cenvat Credit Rules and Central Excise Rules.