The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) restricted penalty to pre-deposit as there was role and knowledge of the appellants in clandestine activity designed to misuse CENVAT credit established.
The department was of the opinion that central excise duty was being evaded by way of illegal availment of CENVAT credit of CVD paid on the imported goods by the manufacturers of aluminium products without physically receiving the goods i.e. imported aluminium scrap allegedly purchased from the traders on high sea sales basis into their factory.
On the basis of the investigation conducted, Show Cause Notice dated 6.11.2009 was issued to the appellants proposing to demand Rs.3,14,24,906/- being the wrongly availed inadmissible CENVAT credit by VAPL Coimbatore.
The counsel for the appellants submitted that benefit of nominal penalty should be given to the appellant. For the application of Rule-26 of the Central Excise Rules, 2002, the condition precedent is that the person who in any manner deals with, any excisable goods, which he knows or reason to believe are liable for confiscation. In the present case, there is no evidence that the appellants were aware of the goods being liable for confiscation.
Further, import duties were promptly paid at the time of import clearance. Therefore, Rule 26 is not applicable. He stated that the prayer of all the Appellants is to restrict the penalty to the extent of pre-deposit, which was already paid.
The Appellants are praying before the Tribunal for restricting the penalty to the extent of pre-deposit, which they have already paid.
A Single Bench of M Ajit Kumar, Technical Member observed that “The discussion in the impugned order has established the role and knowledge of the appellants in the clandestine activity designed to misuse CENVAT credit.”
“I find that the involvement of the Appellants has been established mainly on the basis of collaborative statements, perhaps due to the clandestine nature of the activity and the lack of proper documentation in such cases, as discussed above. However, the imposition of stiff penalties requires stronger evidence. Hence to that extent the penalties imposed on the Appellants are disproportionate and needs to be modified” the Tribunal concluded.
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