2012 (8) TMI 505 - AT - Central Excise

Penalty u/s 11AC on account of wrong availment of 100% Cenvat Credit on capital goods during the period July, 2008 - appellants reversed the entire cenvat credit availed wrongly along with interest before the issue of Show cause notice - Held that - As in the show cause notice itself, it has been stated that the appellants have availed cenvat credit wrongly, therefore the provisions of Section 11AC are not attracted although, they have violated the provisions of Section 11AC, but not with intention to evade payment of duty. There was no intention to evade duty can also be ascertained by verification of their cenvat credit account, as the appellants are having sufficient cenvat credit balance in their account. Penalty set aside.

Summary

Issues: Challenge to penalty under Section 11AC of the Central Excise Act, 1944 for wrong availment of 100% Cenvat Credit on capital goods during July 2008.

The judgment addresses the challenge to the penalty imposed under Section 11AC of the Central Excise Act, 1944, concerning the wrong availment of 100% Cenvat Credit on capital goods in July 2008. The appellants had mistakenly availed 100% credit instead of the entitled 50% as per Rule 4 (2) (a) of the Cenvat Credit Rules, 2004. The proceedings were initiated against the appellants for this incorrect availment, leading to the reversal of the entire wrongly availed credit along with interest before the issuance of the Show Cause notice. The penalty under Section 11AC was imposed and confirmed by lower authorities, prompting the appellants to challenge it.

Upon hearing both sides and examining the submissions and the show cause notice, the judge observed that the appellants had indeed wrongly availed the Cenvat credit, which was detected during an audit. However, it was noted that the appellants had not acted with the intention to evade payment of duty. The judge highlighted that although a violation of Section 11AC had occurred, the absence of intent to evade duty was evident from the sufficient Cenvat credit balance in the appellants' account. Consequently, the judge concluded that since the appellants had not contravened Section 11AC for penalty imposition, the penalty was deemed unwarranted. Therefore, the impugned order imposing the penalty under Section 11AC was set aside, and the appeal was allowed in this regard.