2006 (11) TMI 441 - Commissioner - Central Excise

Summary

Issues:
1. Availing excess Cenvat credit and imposition of penalty.

Analysis:
The appeal was filed against an Order-In-Original by M/s. Elveety Industries Private Limited, a registered unit engaged in biscuit manufacturing, for availing 100% Cenvat credit on capital goods in the same financial year. The Department pointed out the excess credit, leading to its reversal along with interest. A Show Cause Notice was issued proposing recovery of the excess credit, interest, and penalty. The adjudicating authority confirmed a demand of Rs. 7,082/- for Cenvat credit, Rs. 143/- for Education Cess, and imposed a penalty of Rs. 10,000/- under Rule 15 of the Cenvat Credit Rules, 2004. The authority also appropriated the already paid amounts. The appeal challenged the penalty imposition, citing the reversal of the amount before the notice and the absence of mens rea for penalty justification.

The Commissioner noted that the appellants had indeed availed capital goods credit incorrectly by posting 100% in the first financial year instead of the required 50%. However, the excess credit was reversed along with interest before the Show Cause Notice was issued. The Commissioner referred to the view of the Hon'ble High Court of Karnataka, followed by the Hon'ble Tribunal Bangalore, that no penalty is imposable if the liability is discharged before the notice is served. Consequently, the Commissioner set aside the penalty imposed under Rule 15 while upholding the rest of the impugned order.

In conclusion, the appeal was allowed by setting aside the penalty under Rule 15, considering the early payment of duty and interest before the Show Cause Notice. The Commissioner disposed of the appeal accordingly, finding no justification for the penalty imposition in the circumstances where the liability had been discharged promptly.