DINESH MAHESHWARI, J. - (1.) THIS appeal has been preferred by the Union of India through the Commissioner, Central Excise, Jaipur -II under the then existing Section 35G of the Central Excise Act, 1944 ('the Act of 1944') being aggrieved by the order dated 28.03.2005 made by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi ('the Tribunal') in Appeals Nos. E/4167 - 68/04 -NB(SM) reducing the penalty imposed upon the respondent No. 1 -assessee under Section 11AC of the Act of 1944 to an amount of Rs. 50,000/ - and has set aside the order of imposition of penalty on the General Manager of the respondent -assessee.
(2.) THIS appeal was admitted on 08.08.2006 while formulating the following substantial question of law: Whether in the facts and circumstances of the case, Section 11AC is applicable to the facts of the present case and leaves any discretion with the authorities under the Act to reduce the penalty at less than equal to the duty determined where it is found that penalty is otherwise imposable under Section 11AC?. Brief and relevant facts leading to the aforesaid order dated 28.03.2005 and this appeal could be summarised thus : The respondent No. 1, Perfect Thread Mills Limited, Amberi, Udaipur is engaged in manufacture of both dutiable and exempted goods from common inputs. The officers of the appellant department made a surprise visit to the factory premises of the respondent -assessee on 10/11.01.2003 and carried out various checks including the accounts and during the course of checking of records, it was found that the assessee was availing CENVAT credit on inputs and such inputs were used in manufacture of dutiable and exempted goods without maintaining separate records for receipt and consumption of the inputs meant for use in manufacture of said dutiable and exempted goods. According to the appellant, as per Sub -Rule (3) of Rule 6 of the erstwhile CENVAT Credit Rules, 2001 if the manufacturer opts not to maintain separate accounts and the final product falls under the Chapter 50 to 63 of the First Schedule to the Tariff Act, 1985, he shall pay an amount equivalent to CENVAT credit attributable to inputs used in or in relation to the manufacture of such exempted final products at the time of their clearance. However, the respondent -assessee had cleared the exempted goods, i.e., the dyed cotton yarn but had not paid an amount equivalent to the CENVAT credit attributable to inputs used in the manufacture of such exempted cotton yarn at the time of their clearance.
(3.) ACCORDING to the appellant, the General Manager of the respondent -assessee in his voluntary statement recorded on 11.01.2003 under Section 14 of the Act of 1944 admitted that all the work relating to Central Excise was carried under his supervision; and further admitted that they were using the common inputs in the manufacture of dutiable as well as exempted final products and have not reversed the CENVAT credit from October 2001 to December 2002 in respect of dyes and chemicals, and from January 2002 to December 2002 in respect of grey yarn used in the manufacture of exempted goods. On being asked by the officers, the Manager reversed the entry.;