CEA No.29 of 2006 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Date of Decision:-22.4.2010 The Commissioner of Central Excise, Ludhiana ...Appellant Versus M/s Sikri Steels Pvt. Ltd. ...Respondent CORAM: HON'BLE MR.JUSTICE ASHUTOSH MOHUNTA HON'BLE MR.JUSTICE MEHINDER SINGH SULLAR Present:- Mr.Gurpreet Singh, Sr.Standing Counsel for the appellant. Mr.Jagmohan Bansal, Advocate for the respondent. Ashutosh Mohunta, J. (Oral) The revenue has impugned the order dated 9.6.2005 (Annexure A3) passed by the Customs, Excise & Service Tax Appellate Tribunal, vide which the penalty has been reduced from Rs.1,88,997/-, as imposed by the Adjudicating Authority upon the assessee to Rs.50,000/- under section 11AC of the Central Excise Act, 1944 (for short “the Act”). Briefly, the facts of this case are that the respondent-assessee is engaged in manufacture of iron and steel products falling under Chapter 72 of Central Excise Tariff Act, 1985 and is availing the modvat credit under section 57-G of the Act on the basis of the invoices issued by M/s GSW Casting and Forgings, who was a registered dealer. It was found that the goods did not reach the factory premises alongwith the invoices. Accordingly, a show cause notice was served on the respondent asking them to refund the entire modvat credit. The notice also sought to impose the equivalent penalty on the respondent. The Adjudicating Authority held that as the goods did not accompany the invoices, hence, the modvat credit has wrongly been availed by the respondent and imposed the penalty of Rs.1,88,997/- and that it was a case of paper transaction only. The order passed by the Adjudicating Authority was confirmed by the Commissioner (Appeals). However, the Tribunal, vide order (Annexure A3) has reduced the penalty to Rs.50,000/- after holding that it was a clear cut case where the inputs had not been received alongwith the invoices. CEA No.29 of 2006 2 Learned counsel for the appellant has submitted that the Tribunal has erred in reducing the penalty to Rs.50,000/- against the respondent, as once it has been found that the ingredients of Section 11AC of the Act are attracted, then the penalty could not have been reduced and equal amount of penalty had to be imposed. He further submits that the assessee has wrongly availed of the modvat credit without actual receipt of the inputs and as the entire transaction was only a paper transaction and fraudulent transaction, therefore, in these circumstances, equal amount of penalty had to be imposed in view of the decision of Hon'ble Apex Court in case Union of India v. Rajasthan Spinning and Weaving Mills 2009 (238) E.L.T. 3 (SC). Learned counsel for the respondent, however, submitted that the Tribunal has discretion to reduce the penalty. While admitting the present appeal, the following substantial questions of law arise for consideration of this Court:- (i) Whether the learned Tribunal is right in holding that the adjudicating authority has discretion to impose the lesser penalty where the maximum penalty is prescribed under the Act? (ii)Whether penalty imposed under Rule 57-1 read with Section 11 AC of the Central Excise Act, 1944 in cases where the CENVAT credit has been taken or utilized wrongly on account of fraud, willful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the rules made thereunder with intention to evade payment of duty, is mandatory or discretionary in nature and whether it can be reduced by the Tribunal? After hearing the learned counsel for the parties, we are of the considered view that in this case, the assessee has wrongly availed of the modvat credit. He had never received the actual delivery of the goods alongwith invoices and it was a paper transaction. In these circumstances, the present CEA No.29 of 2006 3 case is squarely covered by Rajasthan Spinning and Weaving Mills's case (supra). Accordingly, the Tribunal could not have reduced the penalty from Rs.1,88,997/- to Rs.50,000/-. In view of the above, the questions posed in this appeal are answered in favour of the revenue and it is held that the respondent-assessee i s liable to pay equal amount of penalty imposed under section 11 AC of the Act. Accordingly, the present appeal is allowed and the order passed by the Tribunal is set aside and that of the Commissioner is restored. (Ashutosh Mohunta) Judge (Mehinder Singh Sullar) Judg 22.4.2010 AS