2012 (6) TMI 366 - AT - Central Excise

Penalty u/s 11AC - alleged availment of excess credit under formula specified in Rule 3(7) of Cenvat Credit Rules, 2004 - credit availed on purchases of raw materials from a 100% EOU - SCN speaks of application of wrong formula but does not say what is the correct formula - reversal of credit under protest - Held that - It is only known that there was availment of excess cenvat credit but we do not know whether it was because of calculation mistake or because of application of wrong formula. Since appellants paid dues under protest as soon as it was pointed and subsequently after going through the relevant provisions, revised the calculations and submitted the calculation sheet to the department would show that appellant have acted in a bonafide manner. Hence, there was no intention to evade duty or avail wrong credit and what was happened appears to be a bonafide mistake. Penalty imposed u/s 11AC is set-aside.

Issues:
- Availment of excess Cenvat credit from a 100% EOU
- Application of the correct formula under Rule 3(7) of Cenvat Credit Rules, 2004
- Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944

Analysis:

Issue 1: Availment of excess Cenvat credit from a 100% EOU
The appellant had purchased raw materials from a 100% EOU and availed Cenvat Credit thereon. It was found through detailed verification that the appellant had availed Cenvat credit in excess of the permissible amount as per the formula under Rule 3(7) of Cenvat Credit Rules, 2004. The excess availment was initially calculated at Rs. 3,93,258/-, but upon further review, the adjudicating authority confirmed the excess availment to be Rs. 35,312/-. The appellant reversed the credit under protest and deposited the amount. The tribunal noted that the appellant had acted in a bonafide manner, rectifying the mistake promptly upon being notified by the department.

Issue 2: Application of the correct formula under Rule 3(7) of Cenvat Credit Rules, 2004
The consultant for the appellant argued that the show cause notice did not specify the correct formula that should have been applied under Rule 3(7) of Cenvat Credit Rules, 2004. The department's worksheet indicated an excess availment of Cenvat credit without detailing the formula used. The tribunal observed that the lack of clarity regarding the formula adopted by both the department and the appellant raised doubts about whether the excess credit was due to a calculation error or the application of an incorrect formula. The tribunal found that the appellant's willingness to rectify the mistake promptly and the absence of any intention to evade duty or claim wrongful credit indicated a bonafide mistake rather than intentional misconduct.

Issue 3: Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944
The learned consultant argued that the appellant's mistake in availing the excess credit was unintentional, and there was no malicious intent to evade duty or claim wrongful credit. The tribunal considered the circumstances of the case and concluded that the appellant's actions demonstrated a bonafide mistake rather than deliberate misconduct. As the appellant had promptly rectified the error by depositing the excess Cenvat credit with interest, the tribunal held that the imposition of a penalty under Section 11AC was unwarranted. Consequently, the penalty imposed was set aside, providing relief to the appellant.

In conclusion, the tribunal found that the appellant's excess availment of Cenvat credit from a 100% EOU was a result of a bonafide mistake rather than intentional evasion. The tribunal emphasized the appellant's prompt rectification of the error and their cooperation with the department in resolving the issue. As a result, the penalty imposed under Section 11AC was deemed unnecessary and was set aside, providing relief to the appellant.

← Previous Next →