2016 (2) TMI 1028 - AT - Central Excise

Denial of Cenvat credit - Penalty - Rule 15 of the CCR - Held that - authorities below have observed that the appellant has conceded on the merits of the case with regard to entitlement to the Cenvat credit availed by the appellant. Both the authorities below agreed to impose penalty on the appellant by invoking extended period of limitation without alleging the intention of the appellant to avail Cenvat credit - This is factually contrary to the facts of the case and grounds taken by the appellant in the appeal before the ld. Commissioner (A). I find that the appellant has taken Cenvat credit on the higher education cess of duty paid by them, therefore, I hold that appellant is entitled to take Cenvat credit on account of the education cess paid by them. I also hold that on capital goods, the appellant is entitled to take Cenvat credit 50% of the first year and remaining in the next year - Appeal allowed - decided in favor of the assessee.

Summary

Issues involved:
1. Availing Cenvat credit of education cess and capital goods.
2. Reversal of Cenvat credit due to discrepancies pointed out by audit.
3. Show cause notice for appropriation of amount, interest, and penalty.
4. Dispute over penalty imposition.
5. Denial of Cenvat credit and penalty invocation.
6. Entitlement to Cenvat credit on education cess, capital goods, and steel items.
7. Appellant's challenge to denial of Cenvat credit.
8. Correctness of Cenvat credit availed by the appellant.

Analysis:

1. The appellant availed Cenvat credit of education cess and 100% on capital goods during 2006-2008. Audit discrepancies led to reversal of disputed Cenvat credit with interest. A show cause notice in 2009 demanded appropriation of the amount paid, interest, and a penalty under Rule 15 of Cenvat Credit Rules and Section 11AC of the Act.

2. The appellant claimed entitlement to Cenvat credit on education cess and capital goods. The appellant also argued for Cenvat credit on steel items used in manufacturing parts of capital goods assemblies like acid tanks. The appellant contested the denial of Cenvat credit and penalty imposition.

3. The AR acknowledged the liability for reversing Cenvat credit with interest but contested the penalty imposition. The authorities below imposed penalties without considering the merits of the case or the appellant's contentions.

4. The tribunal found that the appellant challenged issues raised in the show cause notice. It noted that both lower authorities presumed the appellant contested only the penalty, contrary to the appellant's grounds in the appeal.

5. The tribunal ruled in favor of the appellant, allowing Cenvat credit on education cess, 100% on capital goods, and on steel items used in manufacturing. It held that no demand was sustainable against the appellant, requiring a refund of the amount paid. As duty payment was not required, the tribunal concluded that no penalty should be imposed.

6. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.