2014 (1) TMI 1650 - AT - Central Excise

Penalty u/s 11AC - Option to pay 25% penalty - CENVAT Credit - Suppression of facts - Held that - Since the appellant had availed the Cenvat credit even on the value of the inputs not received therefore they had reversed the proportionate credit attributable to goods not received on being pointed out by the visiting audit party. From the facts I find that the appellant had received the insurance claim for short receipt of the goods in their factory but availed Cenvat credit on the total quantity of the inputs as shown in the Bill of Entry. So while availing the credit there might not be irregularity but continuation of the credit in their books of accounts after filing the insurance claim with the authorities become irregular as they knew that the entire quantity of the inputs were not received in their factory. Also from the records it is evident that the appellant had availed the insurance claim on the total value of shortage quantity including the CVD amount. Thus there is an element of suppression in the continuation of credit in their books of accounts after availing the insurance claim. - Consequently the imposition of penalty under Section 11AC of the Central Excise Act 1944 is thus sustainable. - impugned order is set aside to the extent of not allowing the appellant to exercise the option to pay 25% of penalty as prescribed under Section 11AC of the Central Excise Act 1944. - Decided partly in favour of assessee.

Summary

Issues:
1. Availment of Cenvat credit on imported goods.
2. Failure to reverse proportionate credit against insurance claim.
3. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
4. Option to pay 25% penalty as per statutory provisions.

Analysis:

Availment of Cenvat credit on imported goods:
The appellant, engaged in manufacturing steel rolls, availed Cenvat credit on imported melted flux against Bill of Entry during 2007-08. A discrepancy arose when an insurance claim was filed for short receipt of goods, including CVD portion of duty for which credit was availed. The appellant reversed the Cenvat credit upon audit team's notification, but a show cause notice was issued proposing a penalty under Rule 15 of the Cenvat Credit Rules, 2004.

Failure to reverse proportionate credit against insurance claim:
The appellant argued that lack of coordination led to the delay in reversing the proportionate Cenvat credit. They contended that since the credit was paid before the show cause notice, no penalty should be imposed for suppression. Reference was made to relevant judgments to support this argument.

Imposition of penalty under Section 11AC:
The Revenue argued that the appellant continued availing credit even after filing the insurance claim, suggesting irregular intent. However, the Tribunal found no dispute about the short receipt of goods and upheld the penalty under Section 11AC due to the suppression element in continuing to avail credit post-insurance claim.

Option to pay 25% penalty as per statutory provisions:
The appellant contended that they were not given the option to pay 25% of the penalty as mandated by Section 11AC. The Tribunal agreed, citing a judgment requiring the adjudicating authority to provide this option. The impugned order was set aside, directing the Adjudicating Authority to allow the appellant to exercise the option to pay 25% of the penalty in accordance with statutory provisions.

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