Full Judgment
2. Shri S.K. Bansal, learned Chartered Accountant, submitted that the appellants manufacture cement and clinker and avail of CENVAT Credit on inputs and capital goods under the CENVAT Credit Rules; that the Department has disallowed the CENVAT Credit taken by them in respect of Explosives used in the mines during the period 1.7.2001 to 30.4.2002.
He fairly mentioned that in view of the judgment of Supreme Court in the case of CCB, Jaipur v. J.K. Udaipur Udyog Ltd. , he is not pressing the Appeal against disallowance of the CENVAT Credit. He, further, submitted that no penalty is imposable on them as they bona fide believed that the explosives have been used in or in relation to the manufacture of their final product cements; that further, penalty is imposable only when there is suppression or any intention to evade the payment of duty; that it has been held by M.P.High Court in the case of S.N. Sunderson (Minerals) Ltd. v.Superintendent (Prev) the 1995 (75) ELT 275 that penalty is not imposable where act of omission or commission on assessees' part is due to bona fide belief borne out of conflicting Court and Tribunal decision on excisability of the products. We also heard Shri Virag Gupta, learned Department Representative who submitted that during the relevant period, the definition of the inputs has undergone a change wherein it has been specifically mentioned that the credit will be available only in respect of the inputs which are used within the factory of production; that as the explosives were used in the mines, outside the factory premises, the credit was not available to them and accordingly the penalty is imposable.
3. We have considered the submissions of both the sides. As the appellants are not challenging the disallowance of the CENVAT Credit, we uphold the disallowance of MODVAT credit. The definition of 'inputs' has been amended since 2000. Inputs are now required to be used within the factory of production. During the relevant period also, the definition of the inputs as given in CENVAT Credit Rules requires that the inputs are to be used within the factory of production. Rule 13 of CENVAT Credit Rules provides for imposition of penalty if any person takes CENVAT Credit in respect of inputs wrongly. As the Appellants had taken the CENVAT Credit wrongly, penalty is imposable on them However, the penalty of Rs. 3 lakhs imposed on them is on the higher side which we reduce to Rs. One lakh. Thus the Appeal is partially allowed.