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2021 (5) TMI 852 - AT - Central ExciseLevy of Interest - carry forward of excess credit - penalty - the amount was reversed on being pointed out - time limitation of paying interest - HELD THAT - Admittedly there was mistake on the part of the Appellant in carrying forward in their Books of Accounts the closing balance of CENVAT credit for the month of August 2008, while switching from ERP to SAP system w.e.f 01/09/2008, in the opening balance for the month of Sep. 2008. When such mistake was pointed out by the audit team while scrutiny of their records in Sep. 2009, the Appellant immediately reversed the entire credit on 10/09/2009 accepting the lapse on their part but failed to pay applicable interest on the excess credit availed - In the present case, the Appellant reversed the credit in September 2009 but since failed to discharge the interest of the same, consequently, within a period of one year, the interest was demanded from the Appellant by issuing a notice to the Appellant. Hence, the demand for interest is not barred by limitation. Levy of penalty equivalent to the amount of Cenvat Credit reversed - HELD THAT - It is not warranted in the facts of the circumstances of the present case as it was a bona fide mistake of carrying forward excess credit as on 01/09/2008 on account of switching over from ERP to SAP system. There is no other allegation or evidence brought on record by the revenue that intentionally and purposefully the Appellant had shown wrong opening balance thereby continued to enjoy excess credit for a period of time till it is pointed out by the audit. Therefore, imposition of penalty equal to the amount of credit availed cannot be sustained. Appeal allowed in part.
Issues:
1. Whether interest of ?4,10,480/- is payable on the excess credit availed during the relevant period? 2. Whether penalty of equal amount is imposable on the appellant? Analysis: 1. The appellant, engaged in manufacturing packing materials, carried forward excess credit in their CENVAT account due to a clerical error during a software system switch. The excess credit was reversed upon audit scrutiny, but interest was not paid. The appellant argued that the demand notice for interest was time-barred, citing precedents. The tribunal found the argument devoid of merit, distinguishing the cited judgment where interest was demanded much later. In this case, interest was demanded within a year of the credit reversal, thus not barred by limitation. 2. Regarding the penalty imposed equal to the reversed credit amount, the tribunal agreed with the appellant's contention that it was a bona fide mistake during the software switch. No evidence of intentional misrepresentation was found. Therefore, the imposition of an equivalent penalty was deemed unwarranted. The tribunal modified the order, requiring the appellant to pay the interest amount only, which had already been reversed, and setting aside the penalty imposition under Rule 15(2) of CCR, 2004. This judgment highlights the importance of timely compliance with interest payments on excess credits and the necessity of evidence to support penalty imposition in cases of inadvertent errors.
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