2011 (6) TMI 539 - AT - Central Excise

Cenvat credit - appellant has taken cenvat credit which was not admissible - demand with interest and penalty equal to the wrongly taken cenvat credit Held that - Neither the show-cause notice nor the records available, nor the advocate for the appellant or the DR could clearly show that exactly during which period wrong credits were taken. appellant had submitted before the lower authorities that wrong credit was taken because the knowledgeable Clerk was on leave and the person who looked after the work during the period made the mistake. being the position without verifying the claim made by the appellant that the regular Clerk was on leave and this was a bona fide mistake, imposition of mandatory penalty cannot be justified. it was a bona fide mistake. Further, the appellant had not at all challenged the demands. penalty is set aside. appellant is not challenging the interst and shall pay the same forthwith.

Summary

Issues:
- Admissibility of cenvat credit
- Imposition of penalty for wrongly taken credit
- Bona fide mistake due to absence of knowledgeable clerk
- Justification of penalty imposition based on suppression or mis-declaration

Admissibility of Cenvat Credit:
The audit of the appellant's factory revealed the wrongful availing of cenvat credit amounting to Rs. 1,46,183. The appellant, a Multi-national Company, argued that due to a clerk's absence, invoices were mistakenly passed from the Service & Trading Division to the Manufacturing Division, resulting in the irregular credit. The appellant contended that although the credit was taken, it was never utilized as the balance in the cenvat credit account remained above the irregular credit. The appellant cited various decisions supporting the stance that penalty imposition is unwarranted if the wrong credit was not utilized.

Imposition of Penalty for Wrongly Taken Credit:
The Department argued that the irregular credit was taken over nearly a year, and the appellant's reversal of credit only after the Department's audit indicated an intentional act to avail the credit wrongly. The Department emphasized that the quantum of turnover or duty paid is irrelevant. Referring to a High Court decision, the Department asserted that once suppression is invoked for duty demand, penalty becomes mandatory and cannot be waived.

Bona Fide Mistake Due to Absence of Knowledgeable Clerk:
The Tribunal noted that the exact period during which the wrong credits were taken was not clearly established. The appellant's claim of a bona fide mistake due to the absent clerk was considered, especially as no verification proved the omission occurred over a year. The Tribunal found the appellant's argument plausible, given that the cenvat credit account always maintained a balance higher than the irregular credit.

Justification of Penalty Imposition Based on Suppression or Mis-declaration:
While acknowledging the mandatory penalty for suppression or mis-declaration, the Tribunal differentiated the present case where the appellant's claim of a bona fide mistake was accepted. The Tribunal emphasized that the appellant did not challenge the demands and that the penalty was not warranted considering the circumstances. The Tribunal set aside the penalty, stating that the interest, uncontested by the appellant, must be paid promptly.

This judgment highlights the importance of establishing intent and verifying claims in cases of irregular credit availing, emphasizing the need for a thorough examination of facts before imposing penalties based on suppression or mis-declaration.