2014 (12) TMI 273 - AT - Central Excise

CENVAT credit - availment of full credit of duty on the inputs received from 100% EOU instead of eligible credit - Imposition of equivalent penalty - Held that - in the first case where inputs were transferred to the other unit, there is no revenue loss at all since credit was not taken in the other unit. In the normal course credit could have been reversed, invoice issued and other unit could have taken credit and therefore there was no revenue loss. As regards the other two amounts, such mistakes can happen because of arithmetical errors. Therefore I find that in this case imposition of penalty on the ground of suppression of fact may not be sustained. Levy of penalty - Once suppression or misdeclaration is established, penalty is mandatory. In this case, the show-cause notice alleged suppression and it was stated that the fact of availment and utilization of CENVAT credit have not been intimated to the Department by the assessee in their monthly ER1 returns or in any manner whatsoever and the same amounts to wilfull suppression with an intention to evade payment of duty. There is no finding clearly that the amounts taken as credit in this case were not part of the total amount of CENVAT credit taken in the ER1 by the assessee in any of the records. Further there is no requirement under the law to intimate to the Department of each and every document on the basis of which credit has been taken. - Decided in favour of assessee.

Summary

Issues:
1. Demand and appropriation of CENVAT credit
2. Imposition of penalties under various provisions
3. Appeal against penalty imposition

Analysis:

Issue 1: Demand and appropriation of CENVAT credit
The appellant received a show-cause notice for wrong availment and utilization of CENVAT credit on inputs consigned to another unit, availing excess credit on inputs from a 100% EOU, and taking sales tax credit instead of Central Excise duty credit. The respondent paid the wrong availed credits with interest before the notice. The adjudicating authority dropped penalty proceedings, but the Commissioner(Appeals) modified the order, imposing a penalty equivalent to the demanded CENVAT credit under Section 11AC of the Central Excise Act, 1944.

Issue 2: Imposition of penalties under various provisions
The appellant admitted the mistakes and promptly paid the amounts with interest upon realization. The counsel argued that there was no revenue loss in transferring inputs to another unit as no credit was taken there. The errors in availing credits from a 100% EOU and sales tax instead of Central Excise duty were attributed to oversight and arithmetical errors. The tribunal found that imposing penalties for suppression of facts may not be justified in this case, as there was no intention to evade payment of duty. The tribunal emphasized that suppression or misdeclaration must be established for mandatory penalty imposition, which was not clearly proven in this case. There was no legal requirement to intimate every document basis for credit taken, and the appellant was not obligated to inform about wrongly availed credit. Therefore, the penalty imposed on the appellant was deemed unsustainable.

Issue 3: Appeal against penalty imposition
The tribunal allowed the appeal, setting aside the penalty imposed under Section 11AC, providing consequential relief to the appellant. The decision highlighted the importance of establishing suppression or misdeclaration for penalty imposition and clarified the lack of legal obligation to inform the tax authorities about every document basis for credit availed.

In conclusion, the tribunal ruled in favor of the appellant, overturning the penalty imposed under Section 11AC due to the absence of evidence supporting intentional evasion of duty, emphasizing the necessity of proving suppression or misdeclaration for penalty imposition.