2013 (11) TMI 1214 - AT - Central Excise

Interest and penalty on Cenvat credit Erroneously taken till reversal Held that - Following Commissioner of Central Excise & Customs V/s Sweet Industries 2010 (12) TMI 420 - GUJARAT HIGH COURT - Once CENVAT Credit taken is not utilized and subsequently reversed, there is no liability to pay interest - the appellant took credit wrongly taken and was not utilized and subsequently reversed, there is no interest liability. Penalty under Rule 15 (2) of Cenvat credit Rules 2004 r.w. Section 11AC of the Central Excise Act, 1944 - Held that - The appellant has taken CENVAT Credit under the bonafide belief - Once adjudicating authority is convinced that credit was taken by the appellant on bonafide belief and reversed the entire credit when pointed out, then there cannot be a case of imposition of penalty under Rule 15(2) OF CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 relying upon Mahindra & Mahindra Ltd Vs CCE Mumbai-V 2012 (12) TMI 853 - CESTAT, MUMBAI Decided in favour of Assessee.

Summary

Issues Involved:
- Incorrect claiming of CENVAT Credit on inputs from a 100% EOU
- Discrepancy in the CENVAT Credit claimed and required to be taken as per rules
- Reversal of excess credit taken
- Dispute regarding payment of interest on wrongly taken CENVAT Credit
- Imposition of penalty under Section 11AC
- Defense of the stand taken by the first appellate authority

Analysis of Judgment:

Issue 1: Incorrect claiming of CENVAT Credit on inputs from a 100% EOU
The appellant had taken 100% CENVAT Credit on certain inputs from a 100% EOU, contrary to the formula prescribed under Rule 3(7)(a) of the CENVAT Credit Rules, 2004. When the excess credit was identified by an Audit party, the appellant reversed the entire amount of Rs.3,50,991/-.

Issue 2: Discrepancy in the CENVAT Credit claimed and required to be taken
The Commissioner (Appeals) allowed credit on account of Education Cess and S. & H. Education Cess but upheld the penalty under Section 11AC and interest charge on erroneously taken credit until its reversal.

Issue 3: Dispute regarding payment of interest on wrongly taken CENVAT Credit
The appellant contested that interest on wrongly taken CENVAT Credit is not payable if the credit was not utilized and once reversed, it amounts to credit not taken. The appellant relied on various case laws supporting the non-chargeability of interest in such situations.

Issue 4: Imposition of penalty under Section 11AC
The adjudicating authority noted that the appellant had taken the credit under a bonafide belief and reversed it entirely upon identification of the error. Therefore, it was concluded that there was no case for imposing a penalty under Rule 15(2) of the CENVAT Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944.

Issue 5: Defense of the stand taken by the first appellate authority
The Revenue defended the stand taken by the first appellate authority, which was ultimately supported by the Tribunal based on the settled law and judgments cited by the appellant.

In conclusion, the Tribunal allowed the appeal filed by the appellant concerning the non-payment of interest and non-imposition of penalty under Rule 15(2) of CENVAT Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944, based on the observations and legal precedents discussed during the proceedings.