2014 (7) TMI 610 - AT - Central Excise

CENVAT Credit - Capital goods - Availment of 100% Credit in first financial year - confirmation of interest in respect of excess availment of credit - Held that - though the credit was availed premature but the same was actually utilised after it became due to the assessee. In such a scenario, the law declared by the Hon ble High Court of Karnataka in the case of Bill Forge, 2011 (4) TMI 969 - KARNATAKA HIGH COURT would apply. Confirmation of interest set aside. Penalty under Rule 15(1) of CENVAT Credit Rules, 2004 - In terms of provisions of Rule 15(1) of CENVAT Credit Rules, 2004, which provides for imposition of penalty not exceeding the duty or ₹ 2,000, in cases where the assessee takes CENVAT credit in contravention of any of the provisions of these Rules. It is seen that no mala fide intent condition is pre-requisite for imposition of penalty under the said sub-rule. Admittedly, in the present case, appellants have taken the excess credit though not utilised, in contravention of provisions of sub-rules. As such, I am of the view that the appellant is liable to penalty in terms of the said Rule. However, keeping in view that the excess credit, though taken by the assessee, was not actually utilised by them and as such no undue gain stands availed by them - Penalty of ₹ 20000 imposed on assessee - Decided partly in favour of assessee.

Summary

Issues:
Appellant availed 100% CENVAT credit on capital goods over three financial years, contrary to the requirement of availing 50% in the first year and the remaining 50% in the subsequent year.

Analysis:
The appeal involved a dispute regarding the appellant's availing of CENVAT credit on duty paid for capital goods. The original adjudicating authority proposed denial of the entire 100% credit, leading to a penalty imposition of Rs. 2 lakhs. On appeal, the Commissioner (Appeals) acknowledged that the appellant should have availed only 50% of the credit in the first financial year and the remaining 50% in the following year. The Commissioner set aside the confirmed duty demand but upheld the interest and imposed a penalty of Rs. 25,000. The appellant argued that the demand was time-barred and referenced a decision by the High Court of Karnataka. The Tribunal noted that although the credit was availed prematurely, it was utilized after the due date, following the precedent set by the High Court of Karnataka. Consequently, the confirmation of interest was set aside.

Regarding the penalty, the Tribunal imposed a penalty of Rs. 2,000 on the appellant in accordance with Rule 15(1) of the CENVAT Credit Rules, 2004. This rule allows for penalties not exceeding the duty amount in cases where the credit is availed in violation of the rules, without requiring proof of malicious intent. Despite the contravention, as the excess credit was not utilized by the appellant, no undue gain was obtained. Therefore, the penalty was imposed considering the contravention of rules, without any actual gain to the appellant. The appeal was disposed of accordingly.