Penalty Cannot Be Levied Unless Evasion Of Duty Alleged In SCN

Case Law Citation: Precision Metals vs. CCEx, Raigad (CESTAT Mumbai), Appeal No.- E/633/11-Mum, Date of Pronouncement -12.01.2016

(Arising out of Order-in-Appeal No. YDB/45/RGD/2011 dated 21.1.2011 passed by Commissioner of Central Excise (Appeals), Mumbai-II)

Brief of the case:

The CESTAT Mumbai in the case of Precision Metals vs. CCEx held that when there is no allegation regarding fraud, willful misstatement, suppression of fact which are required as per Rule 15(2) read with Section 11AC of the Central Excise Act , then imposition of penalty by the department is wrong and illegal.

Facts of the case:

The assessee is engaged in the manufacture of iron and steel products falling under Chapter 73 of the Central Excise Tariff Act, 1985 and is availing and utilizing credit of duty paid on inputs and capital goods as well as credit of service tax paid on input services.
The assessee also used to export the manufactured goods to foreign countries as per the purchase order placed by foreign customers as per the terms and conditions of the agreement entered into between them. As per the terms and conditions, the cost of transportation is borne by the assessee who thereafter take the Cenvat credit on reverse charge basis.
During the course of departmental audit, the credit admissibility was objected by the assessee as the credit of services consumed post place of removal is not admissible under the Cenvat Credit Rules, 2004.
Adjudicating authority passed an order confirming the demand, interest and penalty. Commissioner (Appeals) set aside the interest but confirmed the demand and penalty.
Aggrieved assessee is in appeal before tribunal against the penalty confirmed by the Commissioner (Appeals).
   Contention of the Assessee:

The learned counsel for the assessee submitted that the assessee cannot go beyond the allegations in the show cause notice and a perusal of the show cause notice clearly shows that there is no allegation of fraud, willful misstatement, suppression of material facts etc. and further it only says that it is not an put service and the appellant has wrongly taken the credit which the appellant has reversed later on.
The learned counsel for the assessee relied on the decision of Hon’ble Bombay HC in the case of CCE, Thane-II vs. Bright Brothers Ltd. reported in 2015 (322) ELT 110 (Bom.).
     Held by CESTAT Mumbai:

The tribunal observed that neither in show cause notice nor in order-in original regarding fraud, willful misstatement, and suppression of fact which are required as per Rule 15(2) read with Section 11AC of the Central Excise Act to impose equal amount of penalty.
It is because the revenue cannot adjudicate anything which is not alleged in show cause notice. Tribunal placed reliance on the decision of Hon’ble Bombay High Court in the case of CCE, Thane-II vs. Bright Brothers Ltd. wherein the court held that the imposition of penalty is justified only in the event when the ingredients necessary to be satisfied are attracted and so satisfied.
Therefore, tribunal ordered to delete the penalty and allowed the assessee’s appeal.

CA Saurabh Chokhra