Commissioner of C. Ex. vs Pyara Rexine Pvt. Ltd.

Deepak Gupta, J.—By means of this appeal the Appellant challenges the order [2010 (254) E.L.T. 471 (Tri.-Del.)] whereby the learned Tribunal has held that the Assessee did not intentionally intend to evade payment of excise duty and the mere fact that it did not reverse the CENVAT credit does not warrant imposition of penalty. The ground given by the learned Tribunal is that the question whether the CENVAT credit is to be reversed or not was itself a matter of dispute in a number of cases therefore it cannot be said that the intention of the Assessee was to evade the payment of tax.

The undisputed facts are that the Assessee was taking benefit of Notification No. 50/2003-C.E., dated 10-6-2003. The department was of the view that the Assessee should reverse the credit relating to the inputs lying in stock as on 30-4-2004 i.e. the date before it started taking benefit of the notification. Subsequent to the advice of the department the Assessee deposited the entire amount claimed on 15-3-2005, 20-3-2005 and 24-3-2005. Thereafter notice was issued why penalty be not imposed upon the Assessee.

The assessing authority vide order dated 26-10-2006 dropped the show cause notice. The Revenue filed an appeal and the appellate authority held that the Assessee did not reverse CENVAT credit and kept silent till it was informed about its liability and therefore penalty equal to the amount of tax payable was imposed upon the Assessee. The learned Tribunal as stated above came to a finding of fact that issues of interpretation of legal provisions were involved and that in such a situation penalty could not have been imposed.

Mr. Rajiv Jiwan, learned Counsel for the Appellant has placed reliance on the decision rendered in Commissioner of C. Ex. and Cus. v. Shri Ram Aluminium Pvt. Ltd. 2009 (242) E.L.T. 202 (Bom.). There can be no quarrel with the proposition of law laid down.

It is true that under the provisions of Section 11AC of the Central Excise Act, 1944 and Rule 13(2) of the CENVAT Credit Rules it is not necessary for the Revenue to prove mens rea. However, the authority while imposing penalty can take into consideration the fact as to whether the Assessee was trying to avoid or evade tax. Avoidance of tax by tax planning is not illegal. If due to certain judicial pronouncements Assessee becomes liable it cannot be said that penalty must be imposed on the Assessee. The question whether penalty should be imposed in a particular case or not is a question of fact as held by this Court in C.E.A. No. 8 of 2006, titled as Commissioner of Central Excise Chandigarh v. Ruchira Papers Ltd. (251) E.L.T. 502 (H.P.). We find that no substantial question of law is involved in the present appeal which is accordingly dismissed in limine.