2006 (7) TMI 412 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Rule 13 of Cenvat Credit Rules.
2. Demand of interest under Rule 12 of Cenvat Credit Rules for belated reversal of excess credit.

Analysis:

Imposition of Penalty under Rule 13 of Cenvat Credit Rules:
The appellant contested the penalty imposed by the Commissioner under Rule 13 of Cenvat Credit Rules for belated reversal of excess credit wrongly taken. The appellant's representative argued that the penalty should not apply as they had reversed the disputed credit before the issuance of the Show Cause Notice (SCN). Citing the case law of Rashtriya Ispat Nigam Ltd. v. CCE, the appellant claimed that penalty imposition was unjustified when the credit was duly deposited before the SCN. However, the respondent's representative argued that the penalty was correctly imposed under Rule 13, emphasizing that the case law cited by the appellant was not directly applicable to this situation. The Tribunal found merit in the appellant's argument and ruled that prima facie, the penalty was not imposable as the excess credit had been reversed prior to the SCN issuance.

Demand of Interest under Rule 12 of Cenvat Credit Rules:
Regarding the demand of interest under Rule 12 of Cenvat Credit Rules for the belated reversal of excess credit, the appellant's representative explained that the confusion during the transition period led to the erroneous credit taken. Despite requesting clarification from the department, they were not provided with clear guidance on the admissible credit. The appellant reversed the excess credit promptly upon notification from the department. The appellant argued that no interest should be levied on the wrongly taken credit, citing Maruti Udyog Ltd. v CCE, Gurgaon, to support their claim. However, the respondent's representative contended that post-amendment of Rule 12, interest was payable on wrongly taken Cenvat credit. The Tribunal acknowledged the respondent's argument, noting that interest was correctly demanded as per the amended Rule 12. The Tribunal upheld the demand for interest, considering the provisions of Section 11AB and the circumstances of the case.

In conclusion, the Tribunal ruled in favor of the appellant regarding the penalty imposition, finding it not applicable due to the timely reversal of excess credit. However, the demand for interest under Rule 12 was upheld, considering the statutory provisions and the circumstances of the case. The Tribunal granted a waiver of pre-deposit and stayed the recovery of the penalty amount pending the appeal's disposal to ensure a fair process for both parties.