2015 (10) TMI 1164 - AT - Central Excise

Waiver of pre deposit - Denial of CENVAT Credit - Penalty u/s 11AC - Capital goods - Held that - Appellant in his appeal seeking relief only for waiver of interest and penalty and there is no contest on the demand of Cenvat amount. From the facts of the case I find that appellant have availed Cenvat credit admittedly which was inadmissible, however on pointing out by the department they have immediately paid the amount of Cenvat credit, however they have not paid interest. - Apex Court judgement 2011 (2) TMI 6 - Supreme Court interest is payable on the Cenvat credit amount which comes to ₹ 65,707/- as confirmed by original authority. As regard imposition of penalty of equal amount of duty under Section 11AC, I am of the view that firstly appellant has taken this credit inadvertently. On pointed out by the department they immediately paid this amount without any contest. Looking to the conduct of the appellant, malafide can not be attributed. The appellant paid entire amount of Cenvat Credit before issuance of show cause notice. Therefore, I am of the view that appellant has made out a fit case for waiver of penalty imposed under Section 11AC - Decided partly in favour of assessee.

Summary

Issues:
1. Admissibility of Cenvat credit on imported machinery and capital goods.
2. Liability for interest and penalty under Section 11AC.
3. Appeal for waiver of interest and penalty.

Analysis:

Issue 1: Admissibility of Cenvat credit
The appellant, engaged in manufacturing excisable goods, availed inadmissible credit of basic custom duty on imported machinery and capital goods. The duties were not specified for availing Cenvat Credit, leading to a disallowance of credit amounting to Rs. 2,80,525. The appellant contended that interest should not be charged as the credit was not unutilized. However, citing the Supreme Court judgment in Union of India vs. Ind-Swift Laboratories Ltd., it was held that interest is chargeable from the date of availing Cenvat Credit in the account, amounting to Rs. 65,707. The appellant's submission for waiver of interest was rejected based on this legal precedent.

Issue 2: Liability for interest and penalty
The appellant promptly paid the disallowed Cenvat credit amount upon departmental notification, before the issuance of a show cause notice. Despite the inadvertent nature of the credit availing, the appellant was liable for interest under Section 11AB, as per legal interpretation. The penalty under Section 11AC, equal to the duty amount, was imposed but subsequently waived due to the appellant's immediate payment and lack of malafide intent. The judgment highlighted the distinction between interest and penalty liabilities, emphasizing the legal obligations arising from availing inadmissible credits.

Issue 3: Appeal for waiver of interest and penalty
The appellant's appeal sought relief only in terms of waiving interest and penalty, not contesting the Cenvat credit demand. The Tribunal upheld the demand for Cenvat credit and confirmed the interest liability while dropping the penalty. The decision was based on the appellant's conduct of promptly rectifying the credit discrepancy upon departmental notification, indicating a lack of deliberate non-compliance. The judgment underscored the importance of complying with Cenvat credit rules and the consequences of inadvertent errors in availing credits.

In conclusion, the Tribunal upheld the demand for Cenvat credit and interest but dropped the penalty imposed under Section 11AC, considering the appellant's immediate rectification of the credit discrepancy. The judgment provided a nuanced analysis of the legal obligations regarding Cenvat credit availing, interest, and penalties, emphasizing compliance with statutory provisions and judicial precedents.