2015 (10) TMI 1331 - AT - Central Excise

Reversal of CENVAT Credit - Imposition of penalty - Held that - Appellant took a credit of ₹ 32,19,567/- as per his misunderstanding of Rule 3(7) of the Cenvat Credit Rules, 2004, as per prescribed farmula. However the same was found to be admissible to the extent of only ₹ 27,53,997/-. The same was paid by the appellant promptly on 04.9.2008 much before the issue of Show Cause Notice dt 12.11.2009. The difference in the amount of duty demand of ₹ 32,19,567/- in the Show Cause Notice and actual amount of ₹ 27,53,997/-, subsequently found to be payable, indicate that there was a confusion even in the mind of Department regarding method of calculating admissible Cenvat Credit under Rule, 3(7) of the Cenvat Credit Rules 2004. The inadmissible credit was also paid one year before the issue of show cause notice. As per para 6.4. of the OIA dt 23.12.2010 passed by the first appellate authority credit taken wrongly was also not utilized by the appellant. In the present facts of circumstances, it is not a fit case for imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Decided in favour of assessee.

Summary

Issues:
Calculation of Cenvat Credit under Rule 3(7) of Cenvat Credit Rules, 2004
Imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004

Analysis:

Calculation of Cenvat Credit under Rule 3(7) of Cenvat Credit Rules, 2004:
The appellant had taken a credit of Rs. 32,19,567 based on a misunderstanding of Rule 3(7) of the Cenvat Credit Rules, 2004. However, upon reevaluation, it was determined that only Rs. 27,53,997 was admissible. The appellant promptly paid the difference before the issuance of the Show Cause Notice, indicating confusion even within the Department regarding the calculation method. The first appellate authority confirmed that the wrongly taken credit was not utilized by the appellant. The Tribunal found that since the inadmissible credit was paid back before the Show Cause Notice and was not utilized, the case did not warrant the imposition of a penalty under Rule 15(2) of the Cenvat Credit Rules, 2004.

Imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004:
The appellant argued against the imposition of a penalty under Rule 15(2) of the Cenvat Credit Rules, 2004, stating that the entire inadmissible credit amount was paid back before the Show Cause Notice was issued. The Department itself displayed uncertainty regarding the exact inadmissible credit. The Tribunal agreed with the appellant's contention, noting that the circumstances did not justify penalizing the appellant under Rule 15(2) of the Cenvat Credit Rules, 2004, along with Section 11AC of the Central Excise Act, 1944. Consequently, the appeal was allowed in favor of the appellant.

In conclusion, the Tribunal found that the appellant's prompt repayment of the inadmissible credit, coupled with the Department's own confusion regarding the calculation method, did not warrant the imposition of a penalty under Rule 15(2) of the Cenvat Credit Rules, 2004. The judgment highlights the importance of clarity in understanding and applying tax rules to avoid misunderstandings and unnecessary penalties in taxation matters.