2006 (11) TMI 507 - AT - Central Excise

Summary

Issues involved: Penalty and interest related to wrongly availed credit of duty u/s Rule 4(2)(a) of Cenvat Credit Rules, 2002.

Issue 1: Penalty and Interest

The appellant wrongly availed 100% credit of duty in the first Financial Year, which was later reversed unutilized. The Advocate argued no contravention of Rule 4(2)(a) of Cenvat Credit Rules, 2002, and emphasized the absence of mala fide intention. Referring to the Capital Goods credit statement and unutilized credit balance, the Advocate contended that no interest or penalty should be imposed. Citing the case of Sagar Twisters, it was argued that unutilized credit cannot be considered as availed. Similarly, the case of Piaggio Greaves Vehicles Ltd. was mentioned to support the argument against penalty imposition when credit reversal was done voluntarily by the manufacturer. The Tribunal's decision in Hindustan Coco Cola Beverages Pvt. Ltd. was also cited to emphasize that penal action is not warranted when credit remains unutilized.

Issue 2: Utilization of Credit

The JDR attempted to differentiate the present case by claiming that the credit was utilized, but no such findings were present in the impugned order. Upon review, it was concluded that the credit was indeed not utilized by the appellants. Relying on the precedents mentioned earlier, it was determined that in a scenario where credit remains unutilized, the imposition of interest and penalty is not justified. Consequently, the interest and penalty amounts were set aside, and the appeal was allowed.

Conclusion

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the interest and penalty amounts due to the unutilized nature of the credit in question. The decision was based on the interpretation of relevant legal provisions and precedents, highlighting the importance of distinguishing between availed and unutilized credits in penalty assessments.