2007 (6) TMI 88 - AT - Central Excise

Interest - Department contended that appellant liable to pay interest on the ground that the wrong availment of credit of capital goods - Held that department contention was not sustained and set aside penalty amount

Summary

Issues Involved:
Appeal against imposition of interest and penalty under Section 11AB of Central Excise Act, 1944 for availing ineligible credit on capital goods prior to 11-5-2001.

Analysis:
The appeal challenged the imposition of interest and penalty under Section 11AB of the Central Excise Act, 1944, for availing ineligible credit on capital goods before 11-5-2001. The appellant had initially availed 100% credit on duty paid for capital goods from April 2000 to February 2001. Upon realizing the error, the appellant deposited the ineligible credit on 5-3-2001. Subsequently, a show cause notice was issued for penalty under Section 11AC and interest under Section 11AB. The adjudicating authority found the appellant's error to be unintentional and dropped the penalty proceedings but ordered interest under Section 11AB. The Ld. Commissioner (Appeals) upheld this decision, stating that Section 11AB was applicable at the time of the offense, even though it was amended later. The lower authorities did not consider Section 11AB in its entirety for the relevant period. However, Sub-Section (2) to Section 11AB exempts cases where duty became payable before the Finance Bill 2001 received assent. The appellant had rectified the error before this date. The decision of the Tribunal in a similar case supported the appellant's position.

The judgment highlighted that the imposition of interest and penalty under Section 11AB was challenged for availing ineligible credit on capital goods before 11-5-2001. The appellant rectified the error by depositing the ineligible credit before the Finance Bill 2001 received assent. The lower authorities failed to consider the applicability of Section 11AB in its entirety for the relevant period. The Tribunal's decision in a similar case supported the appellant's argument, leading to the appeal being allowed with consequential relief.