2011 (9) TMI 320 - AT - Central Excise

Interest and penalty - Respondents had taken excess credit due to clerical error and they have reversed the credit as soon as it was pointed out by the audit - Revenue has pointed out that the respondents have taken excess credit on nine occasions - Considering the same, as well as the decision of the Hon ble Supreme Court in the case of Ind-Swift Laboratories (2011 (2) TMI 6 - Supreme Court)and the provisions of Rule 14(1), held that some penalty is required to be imposed on the respondents to act as a deterrent resulting in availment of ineligible credit in future - Considering all the aspects of the case as well as the fact that the appellants are admitting to interest liability of ₹ 9,005/-, the order of the authorities below in regard to penalty are modified and the respondents are directed to pay a penalty of ₹ 10,000/-

Summary

Issues:
Interest liability under CENVAT Credit Rules, 2004
Penalty imposition under Rule 15(1) and 15(2) of the CENVAT Credit Rules, 2004

Interest Liability Analysis:
The respondents admitted to taking excess credit due to a clerical error but reversed it upon audit discovery. The lower appellate authority ruled in their favor, but the consultant acknowledged liability for interest following the Supreme Court's decision in Union of India Vs. Ind-Swift Laboratories Ltd. The Tribunal upheld the interest demand as per the original order, citing the Supreme Court's decision.

Penalty Imposition Analysis:
The Department argued for both interest and penalty payment based on Rule 14 & 15 of the CENVAT Credit Rules, 2004. The Tribunal found that while interest liability was established, the penalty under Rule 15(2) was not justified as there was no evidence of suppression or fraud in taking excess credit. However, the Tribunal deemed penalty under Rule 15(1) applicable, considering the Supreme Court's interpretation of Rule 14 and the need for deterrence against future irregular credit claims. Consequently, the respondents were directed to pay a penalty of Rs.10,000, modifying the lower authorities' penalty orders.

Conclusion:
The Tribunal upheld the interest liability following the Supreme Court's decision and imposed a penalty under Rule 15(1) due to the repeated instances of irregular credit claims by the respondents. The Department's appeal was partly allowed, and the cross-objection was disposed of.