2015 (3) TMI 126 - AT - Central Excise

Waiver of pre deposit - CENVAT Credit - Imposition of penalty - Malafide intention - Held that - The double entries and system errors had not been detected by the Department they would have continued to enjoy the benefit of ineligible credit at the expense of the exchequer. We find that the irregular availment of the credit was continued about four years. It is difficult to accept that the system error continued for four years. The learned counsel submitted that during the four years, audit was conducted and they have not detected the defect. We are not impressed with the submission of the learned counsel for the reason that it is not the duty of the audit party to examine the system error. On the other hand, we are convinced with the finding of the Commissioner that the applicant is a large corporate house and they have not detected the system error for four years. Hence, the applicant failed to make out a prima facie case for waiver of entire dues. - Partial stay granted.

Issues:
1. Availment of duplicate/ineligible CENVAT credit.
2. Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 r/w Section 11AC of the Central Excise Act, 1944.
3. Contention of malafide on the part of the applicant.
4. System error leading to duplicate credit.
5. Failure to detect irregularities by the Department during audits.
6. Requirement of predeposit for waiver of balance dues.

Issue 1: Availment of duplicate/ineligible CENVAT credit
The applicants, manufacturers of motor vehicle parts, availed CENVAT credit of &8377; 1,95,52,133/- twice for the period December 2008 to March 2012. Upon detection by the audit party, the entire amount was paid along with interest on 18.9.2012. The adjudicating authority imposed a penalty of &8377; 1,87,69,233/- under Rule 15(2) of the CENVAT Credit Rules, 2004 r/w Section 11AC of the Central Excise Act, 1944.

Issue 2: Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 r/w Section 11AC of the Central Excise Act, 1944
The main contention was the absence of malafide intent on the part of the applicant for availing the duplicate/ineligible credit. The learned counsel argued that the credit was reversed promptly upon detection, attributing the duplication to a system error. However, the Commissioner noted the seriousness of such irregularities, emphasizing that if undetected, the applicant would have continued benefiting at the expense of the exchequer. Despite the argument of a system error persisting for four years, the Tribunal found it hard to believe, stating that the audit party is not responsible for identifying system errors. The Tribunal agreed with the Commissioner's view that the applicant, being a large corporate entity, should have noticed the error sooner, leading to the conclusion that no prima facie case was made for a complete waiver of dues.

Issue 3: Contention of malafide on the part of the applicant
The applicant argued the absence of malafide intent in availing the duplicate credit, attributing it to a system error. However, the Tribunal, considering the seriousness of the irregularity and the failure to detect it for an extended period, upheld the imposition of penalties and the requirement for a predeposit.

Issue 4: System error leading to duplicate credit
The applicant claimed that the duplication of credit was due to a system error, which was rectified upon detection by the audit party. However, the Tribunal found it implausible that such an error could persist for four years without being identified by the applicant, especially considering their corporate stature.

Issue 5: Failure to detect irregularities by the Department during audits
The Tribunal highlighted the failure of the Department to detect the irregularities in availing duplicate credit during audits conducted over the four-year period. However, it clarified that the responsibility of identifying system errors does not lie with the audit party but with the applicant, particularly a large corporate entity.

Issue 6: Requirement of predeposit for waiver of balance dues
The Tribunal directed the applicant to predeposit &8377; 10,00,000/- within four weeks, with the balance dues waived upon compliance. The recovery of the waived amount was stayed during the pendency of the appeal.

This judgment addresses the complexities surrounding the availment of duplicate/ineligible CENVAT credit, the imposition of penalties, the presence of malafide intent, system errors, audit oversights, and the procedural requirements for waiver of balance dues.

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