2006 (11) TMI 481 - AT - Central Excise

Summary

Issues involved: Availment of 100% CENVAT credit on capital goods contrary to rules, reversal of amount, show cause notice for penalty and interest, appeal by Department for maintaining penalty and interest amount.

Summary:

Availment of 100% CENVAT credit:
The Respondent had availed 100% CENVAT credit on capital goods in the first Financial Year instead of the prescribed 50%, which was against the CENVAT Rules. Upon identification of this error, the Respondent promptly reversed the amount without utilizing it. Subsequently, a show cause notice was issued demanding the amount, along with proposed penalty and interest.

Appeal by Department:
The Department appealed for upholding the penalty amount under Section 11AC and interest amount under Section 11AD, despite penalty and interest being dropped after verification by the authorities below.

Arguments and Decision:
The Ld. SDR contended that the decision in the case of Machino Montell (India) Ltd. cannot be followed, citing a Supreme Court decision emphasizing the binding nature of a decision's ratio and principles. The Ld. Counsel for the Respondent argued that there was no revenue loss, supporting the authorities' decision to waive the penalty and interest amounts. The Tribunal concurred, finding no error in the impugned order and rejected the Revenue's appeal.

This judgment highlights the importance of adherence to CENVAT Rules, the significance of legal precedents, and the consideration of revenue implications in penalty and interest determinations.