2015 (6) TMI 579 - AT - Central Excise

Penalty u/s 11AC - CENVAT Credit - Suo moto reversal of wrongly availed duty - Held that - The appellant has taken Cenvat Credit in respect of education cess paid on basic custom duty which was not admissible. From the fact, it is clear that there is bonafide mistake in taking such credit on the part of the appellant. On pointed out by the audit, they paid Cenvat amount alongwith interest without raising any dispute of the said payment before issuance of show cause notice. In my considered view since the appellant without contesting and without protest paid wrongly availed Cenvat Credit alongwith interest before issuance of show cause notice and intimated vide their letter dated 19/5/2007 the case is squarely covered by subsection (2B) of Section 11A of Central Excise Act, 1944 according to which the Revenue should not have issued show cause notice. Therefore payment of Cenvat Credit alongwith interest attained finality. Since show cause notice was not supposed to be issued, consequential penalty should not have been imposed. In view of this position, I set aside the penalty under Section 11AC invoking provision of subsection (2B) of Section 11A of Central Excise Act, 1944. It is made very clear that payment of Cenvat Credit and interest thereupon is held to be sustained - Decided partly in favour of assessee.

Summary

Issues:
1. Admissibility of Cenvat Credit on Education Cess.
2. Time bar for issuing show cause notice.
3. Imposition of penalty under Section 11AC.

Analysis:
1. The appellant, M/s. Indian Oil Corporation Ltd, availed Cenvat Credit on Education Cess paid on Basic Custom duty, which was found to be inadmissible. The appellant voluntarily paid the wrongly availed credit amount along with interest upon detection by the audit officer before the issuance of a show cause notice. The appellant argued that the credit was taken under a bona fide mistake and without any intention to evade duty. The appellant's counsel cited the case law of Pushpam Pharmaceuticals to support the argument that if there is no commission or omission noticed by the assessee, the extended period for issuing a show cause notice cannot be invoked.

2. The appellant contended that the show cause notice issued after two years from the date of payment was time-barred. The appellant's counsel further argued that since there was no intention to evade payment of duty and the mistake was bona fide, the penalty under Section 11AC should not be imposed. The counsel also emphasized that being a public sector entity, there could not have been any intention to evade duty, and the penalty should not be imposed. Various judgments were cited to support these arguments.

3. On the other hand, the Ld. Addl. Commissioner (A.R.) reiterated the findings of the impugned order, stating that the payment made by the appellant was only after detection by the audit party, indicating suppression of facts. The Addl. Commissioner argued that since the demand was sustainable for an extended period, the penalty under Section 11AC should not be waived or reduced. After considering the submissions from both sides, the tribunal found that the appellant had made the payment of Cenvat Credit along with interest without contesting before the issuance of the show cause notice. The tribunal held that as per subsection (2B) of Section 11A of the Central Excise Act, 1944, the show cause notice should not have been issued, and hence, the penalty under Section 11AC was set aside. The tribunal clarified that the payment of Cenvat Credit and interest was upheld, and the appeal was partly allowed.

This detailed analysis of the judgment highlights the key issues of admissibility of Cenvat Credit, time bar for issuing show cause notice, and imposition of penalty under Section 11AC, providing a comprehensive overview of the legal arguments and the tribunal's decision.