By TIOL News Service

CHENNAI, APR 13, 2014: THE assessee is a manufacturer of CR Sheets and avails CENVAT credit facility. They also undertake job work activity for M/s. Hyundai Motors India Ltd., and claim the benefit of Notification No.214/86-CE.

For conducting job work the assessee availed CENVAT credit on inputs. It is the case of the department that since the job worked goods were cleared under exemption notification 214/86-CE the credit availed on inputs should have been reversed. The Department demanded Rs.88,982/- out of which the assessee had paid Rs.61,375/-. There was another demand and which was in respect of rusted cenvatted Coils cleared as scrap at scrap value instead of reversing credit initially taken - the amount involved was Rs.1,52,307/-.

The adjudicating authority confirmed the demands and imposed equivalent penalty.

Since the Commissioner(A) dismissed the appeal, an appeal was preferred before the CESTAT. The Tribunal set aside the demand of Rs.88,982/- by relying upon the LB decision in Sterlite Industries - 2005-TIOL-305-CESTAT-MUM-LB but confirmed the demand of duty of Rs.1,52,307/- along with proportionate interest. The equivalent penalty imposed was also set aside by the Bench. We reported this order as 2009-TIOL-1797-CESTAT-MAD.

Aggrieved, an appeal was filed by the Revenue before the High Court.

The Counsel for the Revenue submitted that since the LB decision in Sterlite Industries is pending in appeal, the question of law framed is not pressed.

In the matter of imposition of equal penalty the High Court observed -

"10. The Tribunal, after examining the facts pointed out that Rule 3(4) of the CENVAT Credit Rules, 2002 came into effect on 01.03.2003 and the assessee's plea that they were ignorant about such an amendment for some period of time was found to be acceptable. Furthermore, the Tribunal noticed that though the amendment came into effect from 01.03.2003 and the Department did not act immediately by issuing a show cause notice within the period of limitation prescribed under the Act. Further on perusal of the allegations made in the show cause notice, it is evidently clear that there is no material placed by the Department to establish that the conduct of the assessee in reversing the credit on the basis of the transaction value of the inputs, though the amendment came into effect from 01.03.2003 was with an intention to evade payment of duty. Thus in the absence of such a finding that there was intention to evade payment of duty, the Tribunal rightly deleted the penalty under Section 11AC of the Act."

Holding that the Tribunal is perfectly justified in deleting the penalty levied u/s 11AC of the CEA, 1944, the only question of law raised was answered against the Revenue.

The Civil Miscellaneous Appeal was dismissed.

(See 2014-TIOL-485-HC-MAD-CX)