2016 (6) TMI 1217 - AT - Central Excise

Penalty - wrong availment of CENVAT credit on capital goods - Rule 4(2) (a) of CCR - Held that - appellant s bona-fides are strengthened by the fact that as soon as the audit pointed out the short levy, they paid differential duty along with interest before issuance of SCN - there does not appear to be any deliberate suppression by the assessee with intent to evade duty, hence, the penalty under Rule 15(2) of Cenvat Credit Rules, 2004 is not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Incorrect availing of Cenvat credit on capital goods
- Short payment of duties due to wrong assessment of goods
- Wrong assessment leading to higher abatement under Section 4A of Central Excise
- Confirmation of demand, interest, and penalty by the Adjudication order
- Appeal against the decision of the Id. Commissioner (Appeals) regarding penalty imposition

Analysis:
The case involves an appeal against an order passed by the Id. Commissioner (Appeals) related to the incorrect availing of Cenvat credit on capital goods, short payment of duties due to wrong assessment of goods, and wrong assessment leading to higher abatement under Section 4A of Central Excise. The appellants, engaged in the manufacture of goods falling under specific chapters, were found to have taken 100% credit on capital goods instead of the prescribed 50% as per Rule 4(2)(a) of the Central Excise Tariff Act, 1985. Additionally, they had short paid duties and incorrectly assessed certain items, resulting in a demand for payment. The Adjudication order confirmed a demand of &8377; 68,065/- along with interest and imposed a penalty of the same amount, which was upheld by the Id. Commissioner (Appeals).

During the proceedings, the appellants did not dispute the demand and interest, which they voluntarily paid upon being pointed out by the Audit Team. The main contention was against the penalty imposition. The appellants argued that there was no suppression of facts as the errors were reflected in their monthly ER-I returns filed with the Department. They admitted to a genuine error in taking higher abatement on a few items due to clerical mistakes. The appellants highlighted their prompt payment of the extra duty once the discrepancies were identified, even before the issuance of a Show Cause Notice.

Upon hearing both parties and examining the records, it was observed that the appellants did not contest the demand and interest previously. The only issue under consideration was the waiver of the penalty. The tribunal acknowledged the appellants' admission of mistakes and their proactive approach in rectifying the errors. It was noted that the Cenvat Credit taken was correctly declared in the ER-I returns, and the plea of clerical mistake for wrong abatement on a few items was accepted due to the small amount involved. Considering the circumstances and the lack of deliberate suppression to evade duty, the penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 was deemed unjustified. Therefore, the penalty imposed on the appellants was set aside, modifying the Id. Commissioner (Appeals) order accordingly. The appeal was disposed of in favor of the appellants.