2012 (7) TMI 606 - AT - Central Excise

Demand of CENVAT credit and penalty u/r 15 r.w.s 11AC - the appellant had availed CENVAT credit in excess of the permissible credit - Held that - While the show cause notice says that wrong formula has been applied under Rule 3(7) of CENVAT Credit Rules, 2004 resulted in excess availment of credit it does not say what is the correct formula - a simple worksheet has been given without indicating any formula and the original adjudicating authority has also not indicated what was the formula has to be adopted that there was an excess availment CENVAT credit but no information about the fact that whether it was because of calculation mistake or because of application of wrong formula - as that appellants paid CENVAT credit under protest as soon as it was pointed and subsequently after going through the relevant provisions, made the calculations and submitted the calculation sheet to the department would show that appellant have acted in a bonafide manner, as there was no intention to evade duty or avail wrong credit and what was happened appears to be a bonafide mistake - thus, imposition of penalty under Section 11AC is not warranted - decided in favour of assessee.

Summary

Issues:
Excess availment of CENVAT credit, correct formula application, penalty imposition under Rule 15 of CENVAT Credit Rules, 2004, bonafide mistake, intention to evade duty, appropriateness of penalty under Section 11AC.

Excess Availment of CENVAT Credit:
Upon scrutiny, it was found that the appellant had availed CENVAT credit in excess of the permissible limit as per Rule 3(7) of CENVAT Credit Rules, 2004. The appellant reversed the credit under protest, leading to a show cause notice for confirming the demand of CENVAT credit and imposing penalties. The initial adjudicating authority confirmed the excess availment at Rs.2,91,090 and imposed a penalty accordingly. The appeal before the Commissioner (Appeals) resulted in a reduced demand of Rs.1,24,056 with a penalty equal to the demand.

Correct Formula Application:
The appellant argued that the show cause notice did not specify the correct formula for calculating the differential CENVAT credit payable. They contended that there was confusion regarding the application of the formula under Rule 3(7) of CENVAT Credit Rules, 2004. The lack of clarity in the notice and the absence of a clear indication of the correct formula raised doubts about the accuracy of the excess credit calculation.

Penalty Imposition and Bonafide Mistake:
The appellant maintained that the excess credit was a result of a genuine mistake and not an intentional evasion of duty. They highlighted that upon realizing the error, they promptly deposited the entire amount, demonstrating their good faith. The Tribunal acknowledged the appellant's proactive approach in rectifying the miscalculation and found that there was no deliberate attempt to avail wrongful credit. Consequently, the imposition of a penalty under Section 11AC was deemed unwarranted, and the penalty was set aside with relief granted to the appellant.

Conclusion:
The Tribunal, after considering the submissions from both sides, concluded that the appellant's actions reflected a bonafide mistake rather than a deliberate evasion of duty. The prompt rectification of the error and the voluntary deposit of the excess credit amount, along with interest, indicated the appellant's genuine intent. Therefore, the penalty under Section 11AC was deemed unnecessary, and the appellant was granted relief from the imposed penalty.