By TIOL News Service

MUMBAI, JUNE 27, 2016: THIS is a Revenue appeal filed in the year 2007.

By a Notification no. 23/2004-CE dated 09.07.2004 tractors were exempted from payment of CE duty. It was noticed by the departmental officers that during the period 9th July 2004 to 12th August 2004, respondent assessee had not maintained separate books of accounts for the common inputs consumed in the manufacture of dutiable and exempted goods and, therefore,were required to pay an amount equivalent to 8% of the value of the exempted goods viz. tractors.

On being informed by the Revenue, the respondent discharged the said amount along with interest.

Nonetheless, a SCN was issued for appropriation the amount paid and also for imposition of penalties. The original authority imposed equivalent amount of penalty besides appropriating the amounts paid by the assessee.

The Commissioner (A) set aside the penalties on the ground that the amount was paid before issuance of SCN and this is what the Revenue is aggrieved with.

The AR submitted that the assessee being from the organized sector should have complied with the CCR and since the lapse was rectified only after pointing out by Revenue, penalty is rightly imposable.

The respondent assessee submitted that on 13.08.2004 itself, they debited the amount equivalent to 8% of the value of the exempted goods along with interest and SCN was issued on 13.09.2005. Therefore, penalties imposed u/r 12 of the CCR, 2002 is unwarranted more so when the provisions of Section 11AC are not applicable to the case on hand.

The Bench observed that the Revenue appeal is devoid of merits because -

++ Firstly, it is correctly pointed out by the learned counsel that the amount of 8% of the value of the exempted goods is paid off by the respondent on being pointed out that the said amount is due from them and so it is to be noted that the products tractors were dutiable till July 2004 and were exempted by notification due to which there may be confusion.

++ Secondly, we find that the confirmation of the amounts of 8% of the value of exempted goods is not akin any duty which is short levied or short paid. In our considered view, this amount being only in consideration for the utilization of comm on inputs, there were no provisions for recovery of the said amounts during the relevant period, more so under the provisions of section 11A of the Central Excise Act, 1944. In the absence of any recovery mechanism under Section 11A, we find the penalties imposed under Rule 12 of the Cenvat Credit Rules, 2002 read with section 11AC of the Central Excise Act is incorrect.

Concluding that the Commissioner (A) had correctly set aside the penalties imposed by the adjudicating authority, the impugned order was upheld and the Revenue appeal was rejected.

(See 2016-TIOL-1540-CESTAT-MUM)