2014 (2) TMI 350 - AT - Central Excise

Penalty u/s 11AC - Availment of 50% of CENVAT Credit of duty paid capital goods - Reversal of CENVAT Credit - Commissioner dropped penalty - Held that - in the show-cause notice in para (iii) it has been recorded that the noticee had intentionally taken wrong credit of duty on capital goods and utilized the same for payment of Central Excise duty. They did not reverse the said credit on their own accord but only after being pointing out by the departmental officers and hence they appear liable for penal action. On perusal of the said allegation in the show-cause notice, the credit has been taken intentionally and wrongly. Both are contrary terms. If the credit is taken intentionally then it cannot be taken wrongly but if it is mentioned wrongly then it cannot be intentionally. When the show-cause notice alleges two contrary terms against the respondent in that situation, benefit of doubts goes in favour of the respondent. As show-cause notice has not alleged the respondent clearly therefore I uphold the impugned order wherein penalty has been dropped against the respondent - Decided against Revenue.

Summary

Issues:
- Appeal against penalty confirmed under Section 11AC of the Central Excise Act, 1944 set aside by the Commissioner (Appeals).

Analysis:

The judgment pertains to an appeal by the Revenue against an order where the penalty confirmed under Section 11AC of the Central Excise Act, 1944 against the respondent was set aside by the Commissioner (Appeals). The case revolves around the respondent procuring capital goods in different years and availing CENVAT credit on them. The audit revealed discrepancies in the availed credits, leading to the reversal of credits and payment of interest by the respondent. The Revenue issued a show-cause notice for imposing a penalty under Section 11AC of the Act, which was initially confirmed but later dropped by the Commissioner (Appeals), prompting the Revenue's appeal.

During the hearing, the Revenue argued that the penalty should not have been dropped as the duty and interest were paid only after the audit pointed out the discrepancies, citing a Supreme Court judgment to support their stance. Conversely, the respondent's representative contended that the credit was mistakenly taken, promptly rectified upon detection, and that the show-cause notice was issued after a considerable period, lacking mens rea for sustaining the penalty.

Upon reviewing the submissions and records, the judge noted that the show-cause notice accused the respondent of intentionally and wrongly taking the credit, presenting contradictory terms. As intentional and wrongful actions are mutually exclusive, any ambiguity should benefit the respondent. Consequently, the judge upheld the decision to drop the penalty against the respondent, as the notice did not clearly establish their liability.

In conclusion, the appellate tribunal upheld the Commissioner (Appeals)'s decision to set aside the penalty confirmed under Section 11AC of the Central Excise Act, 1944 against the respondent, emphasizing the importance of clarity and consistency in allegations made in show-cause notices to determine liability accurately.