2011 (11) TMI 339 - AT - Central Excise

Waiver of penalty under the provision of Rule 13 (2) of Central Excise Rules, 2002 read with Section 11AC - credit of CVD availed in installments on imported goods mistakenly deeming them to be capital goods later reversed the credit with interest penalty imposed Held that -Assessee has himself realized that the credit of CVD paid on imported goods was not available to them and have accordingly reversed the credit, they cannot be held guilty of any malafide. No objection was taken by the Revenue in respect of availment of said credit then. Thus, penalty is set aside.- Decided in favor of assessee.

Summary

Issues:
Challenge to penalty imposed under Rule 13 (2) of Central Excise Rules, 2002 read with Section 11AC of the Act.

Detailed Analysis:

1. The appellant, engaged in the manufacture of felt, imported certain goods and availed CVD credit, later realizing that the goods were not capital goods. They voluntarily reversed the credit along with interest before any show cause notice was issued.

2. The proceedings were initiated against the appellant for imposing a penalty. The appellant argued that their reversal of the credit was a bona fide mistake, and hence, penal provisions should not be invoked.

3. The appellate authority observed that the appellant's reversal of the credit before any notice indicated their awareness that the goods were not modvatable capital goods. However, the tribunal disagreed, stating that the appellant's actions did not demonstrate malafide intent.

4. The tribunal noted that the appellant had filed returns showing the credit availment, and the Revenue did not object at the time. The appellant voluntarily reversed the credit in 2004 after realizing the mistake, which did not warrant the imposition of penalties.

5. Ultimately, the tribunal set aside the penalty imposed on the appellant while confirming the duties and interest leviable on the same. The appeal was disposed of in favor of the appellant, emphasizing the absence of malafide intent in their actions.

This judgment highlights the importance of assessing the intent behind actions when determining the applicability of penal provisions in cases of inadvertent errors or voluntary corrections made by the taxpayers.