2015 (12) TMI 1597 - AT - Central Excise

Disallowance of CENVAT credit - penalty imposed - Held that - Proceedings against the appellant were initiated much after the disputed amount was fully paid. It would appear the payment under protest has prompted such proceedings. In any case, the appellant never disputed the issue on merits from the beginning except to the fact that the reversal was made under protest. This is also a fact that the credit availed was reflected in the statutory records and the eligibility was examined by the audit from such records only. The Original Authority considered the facts of the case and did not impose penalty. The Appellate Authority imposed equal penalty on the ground that the demand covered extended period. As already noted when the need for issue of demand itself is not properly justified, there is no ground to impose equal penalty in the present case.

Summary

Issues:
1. Availment of Cenvat credit on outward freight
2. Reversal of credit under protest
3. Show cause notice for disallowing credit and imposing penalties
4. Imposition of equal penalty under Section 11AC of the Central Excise Act, 1944

Analysis:

Availment of Cenvat credit on outward freight:
The appellant availed Cenvat credit on outward freight for transportation of goods beyond the factory gate. Upon audit, they were advised to reverse the credit as they were deemed ineligible. The appellant complied by reversing the full amount under protest.

Reversal of credit under protest:
The appellant, upon being informed by audit officers, reversed the entire credit amount under protest. They maintained that despite availing the credit, they had never utilized it due to doubts and disputes surrounding the issue.

Show cause notice for disallowing credit and imposing penalties:
A show cause notice was issued to the appellant for disallowing the credit on outward freight and imposing penalties, more than six months after the credit reversal. The Original Authority disallowed the credit and imposed a penalty of &8377; 2,000. Subsequently, the Department appealed for an equal penalty under Section 11AC of the Central Excise Act, 1944.

Imposition of equal penalty under Section 11AC:
The Commissioner (Appeals) allowed the Department's appeal and imposed an equal penalty on the appellant under Section 11AC. The appellant contested this penalty imposition, arguing that there were no grounds for such a penalty as there were no allegations of suppression or fraud.

The Appellate Tribunal, upon review, found that the proceedings against the appellant were initiated well after the disputed amount had been fully paid under protest. The Tribunal noted that the appellant had not disputed the issue on merits and that the credit availed was reflected in statutory records. The Tribunal concluded that since the need for the demand itself was not properly justified, there was no basis for imposing an equal penalty. Therefore, the Tribunal held that the imposition of an equal penalty was unjustified and allowed the appeal, deeming the impugned order unsustainable in this regard.