Payment of 25% of Penalty is adequate to Compensate Revenue Department: CESTAT sets aside Penalty under Rule 15(2) of CENVAT Credit Rules [Read Order]

The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) while setting aside the penalty under Rule 15(2) of CENVAT Credit Rules has held that payment of 25% of the Penalty is adequate to compensate the revenue department if the duty along with interest is paid within 30 days from the communication or order.

Shri M.N. Bharathi, Advocate appeared for the Appellant and Smt. AnandalakshmiGaneshram, Superintendent appeared for the Respondent.

M/s. Surin Automotive Ltd., the appellant is engaged in the manufacture of automobile parts and is also availing CENVAT credit of duty paid on inputs, capital goods and input services. It was noticed that the appellant was purchasing/receiving raw materials, namely, steel coils and sheets from their supplier M/s. Sungwoo Gestamp Hi-tech (Chennai) Ltd. who in turn was buying from various places and clearing it as such to the appellant. Thus, they were passing on the CENVAT credit.

While doing so, the supplier opted for a uniform price and passed on uniform credit instead of paying an amount equal to the credit availed on the raw materials. This resulted in passing on excess credit or lesser credit which was later rectified by the supplier by way of issuing credit notes when there were excess and supplementary invoices for a lesser amount.

 It was noted by the audit wing that even though a credit note was issued by the supplier, the appellant failed to reverse the respective credit availed. Show Cause Notice was issued to deny the credit of Rs.40,61,911/- for the period from April 2012 to March 2014 along with interest and for imposing penalties under Rule 15(2) of CENVAT Credit Rules, 2004 r/w Sec. 11AC of the Central Excise Act, 1944 which was confirmed by the original authority. On appeal, the Commissioner (Appeals) upheld the same.

It was contended that the appellant was not given the option to pay 25% of the penalty amount. This is grossly erroneous as the first proviso to Sec. 11AC states that if the duty along with interest is paid within 30 days from the communication or order, the amount of penalty liable to be paid by the assessee would be only 25% of the duty so determined.

The Tribunal viewed that the appellant had paid duty along with interest and a 25% of penalty on receipt of the Order in Original. The adjudicating authority has not given the option to pay 25% of the penalty in the order passed by him. A Coram comprise of Ms SulekhaBeevi C.S., Member (Judicial) held that “payment of 25% of the penalty amount paid by the appellant would suffice and the impugned order confirming the equal penalty was set aside without disturbing the confirmation of duty and interest.” The appeal was partly allowed.

To Read the full text of the Order CLICK HERE

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