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2011 (10) TMI 539 - AT - Central ExcisePenalty u/s 11AC - Reversal of CENVAT Credit - Held that - it becomes quite clear that assessee found out wrong availment of credit on their own and reversed it in August 2006 and when audit party pointed out excess availment of credit in 2008 once again reversed the same apparently forgetting the fact that the amount already had been reversed. The very fact that appellant had reversed the credit by themselves which was wrongly utilized by them would show that there was no intention to evade payment of duty by suppressing facts or resorting to misdeclaration. Further prompt reversal of the amount and payment of interest in December 2008 would support the view that appellants did not have any intention to evade duty. Under these circumstances I do not consider that imposition of penalty in this case is warranted. Accordingly the impugned order as regards penalty under Section 11AC is set aside - Decided in favour of assessee.
Issues:
1. Availment of Cenvat credit on capital goods. 2. Reversal of Cenvat credit due to mistake. 3. Excess availment of Cenvat credit. 4. Imposition of penalty under Section 11AC of Central Excise Act, 1944. Availment of Cenvat credit on capital goods: The appellant availed Cenvat credit during 2005-2006 and 2006-2007 on capital goods but later realized there was a mistake in the availment process. They reversed the Cenvat credit of Rs. 1,04,402/- on 1-8-2006. Subsequently, during an audit, it was discovered that there was an excess availment of Cenvat credit amounting to Rs. 1,11,996/-. The appellant promptly reversed this excess amount on 7-11-2008 and paid interest of Rs. 7,000/- on 12-12-2008. The audit party also found a short payment of wrongly availed Cenvat credit of about Rs. 7,000/- due to the earlier reversal. No refund claim was filed by the appellant for the excess reversal made on 7-11-2008. Reversal of Cenvat credit due to mistake: The appellant, upon realizing the mistake in the availment of Cenvat credit, took corrective actions by voluntarily reversing the wrongly utilized credit amounts. The reversal in August 2006 and later in 2008, upon the audit party's discovery of excess availment, demonstrates the appellant's proactive approach in rectifying errors. The appellant's actions indicate a lack of intention to evade duty by suppressing facts or resorting to misdeclaration. The swift reversal of credit and payment of interest further support the conclusion that there was no intent to evade duty. Excess availment of Cenvat credit: The audit revealed an excess availment of Cenvat credit, which the appellant promptly rectified upon being notified. The appellant's cooperation with the audit findings and immediate reversal of the excess credit amounts indicate a willingness to comply with the regulations and rectify any errors in the availment process. The absence of any refund claim for the excess reversal made on 7-11-2008 suggests that the appellant acknowledged and rectified the mistake without seeking undue benefits. Imposition of penalty under Section 11AC of Central Excise Act, 1944: The issue of penalty under Section 11AC was the subject of the appeal. The tribunal noted that the appellant had voluntarily reversed the wrongly utilized Cenvat credit amounts upon self-discovery and audit findings. Considering the appellant's prompt actions in rectifying the errors, the tribunal concluded that there was no intention to evade duty. Therefore, the tribunal set aside the imposition of penalty under Section 11AC, emphasizing the appellant's proactive approach in correcting the mistakes without any intent to evade duty or benefit unlawfully. This judgment by the Appellate Tribunal CESTAT AHMEDABAD highlights the importance of self-correction and cooperation with audit findings in cases of inadvertent errors in availing Cenvat credit. The tribunal's decision to set aside the penalty under Section 11AC reflects a nuanced understanding of the appellant's actions and intent, emphasizing compliance and rectification over punitive measures in cases of genuine mistakes.
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