2012 (3) TMI 361 - AT - Central Excise

CENVAT Credit - Penalty - Non utilization of credit - Held that - Penalty proceeding being quasi-criminal in nature the conception, preparation, attempt and commitment should demonstrate contumacious conduct and result in causing prejudice to Revenue. The appellant did not reach to the commitment stage although conception and preparation for taking credit is visible from the credit entry in the statutory record. In absence of attempt and commitment penalty is not exigible - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under Section 11AC of the Central Excise Act, 1944 based on the utilization of wrongly taken credit.

Analysis:
The appellant's consultant argued that the penalty should be waived as the credit was never utilized, relying on the judgment in the case of Commissioner of Central Excise, Mumbai-I v. Bombay Dyeing & Mfg. Co. Ltd. The consultant highlighted that the revenue was not affected as the credit existed in the statutory record but was not utilized. The consultant emphasized that had the credit been utilized wrongly, a penalty would have been imposed. On the other hand, the Departmental Representative contended that once credit is taken, it causes prejudice to revenue, citing the decision in Union of India v. Ind-Swift Laboratories Ltd.

Upon hearing both sides and examining the records, the Tribunal noted that the dispute centered on the imposition of the penalty. It was established that although the credit was entered into the statutory record, there was never a shortfall in the credit balance during the relevant period. The Tribunal observed that there was no evidence of any utilization of the credit, and the appellant's actions did not appear to be willful suppression. The Tribunal also noted that the decision relied upon by the appellant was distinguishable as it pertained to the utilization of credit before its reversal, unlike the present case.

The Tribunal emphasized that penalty proceedings are quasi-criminal in nature and require a demonstration of contumacious conduct causing prejudice to revenue. In this case, the appellant did not progress beyond the stage of conception and preparation, as there was no attempt or commitment to utilize the credit wrongly. As a result, the Tribunal concluded that the penalty was not exigible and decided to allow the appeal, waiving the penalty imposed under Section 11AC of the Central Excise Act, 1944.