2015 (10) TMI 1666 - AT - Central Excise

Denial of CENVAT Credit - Penalty u/s 11AC - Held that - It Is seen that the applicant was expected to reverse the Cenvat credit at the time of clearance. The word amount used in Rule 3(4) is with, reference to duty alone. In fact, whenever such an amount is reversed the same can also be used as credit by the recipient of such goods. In these circumstances; I do not find any force in the appellant s contention that they are not liable to pay the interest. I accordingly, order that the appellant will pay the interest from the date of clearance till the date of payment of Cenvat credit. As far as the penalty under Section 11AC is concerned, I agree with the appellant s contention that the ingredient as prescribed under Section 11AC for imposition of penalty are not present in the present case and accordingly, penalty under Section 11AC is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Availing Cenvat credit on unused dies
2. Liability for interest and penalty under Rule 3(4) of Cenvat Credit Rules, 2002
3. Interpretation of Section 11AC for penalty imposition

Analysis:

1. The case involved the appellant availing Cenvat credit on dies that were never used and later sold as scrap. The dispute arose when it was pointed out during an audit that the appellant needed to reverse the Cenvat credit availed as per Rule 3(4) of the Cenvat Credit Rules, 2002.

2. The appellant argued that there was no intention to evade duty, as the dies were never used and were ultimately scrapped. They contended that since they immediately reversed the credit upon audit notification, the penalty under Section 11AC should not apply. The appellant also argued against the imposition of interest, stating that Rule 3(4) did not provide for charging interest on the reversed amount.

3. The Assistant Commissioner, representing the respondent, referred to relevant legal precedents, including the judgment of the Hon'ble Supreme Court in a specific case, to support the demand for interest. The Tribunal considered the arguments from both sides and observed that the appellant was required to reverse the Cenvat credit at the time of clearance, with the "amount" mentioned in Rule 3(4) referring to duty alone. The Tribunal ruled that interest was payable from the date of clearance till the date of payment of Cenvat credit. Regarding the penalty under Section 11AC, the Tribunal agreed with the appellant's argument that the necessary ingredients for imposing a penalty were absent in the present case, and thus, the penalty under Section 11AC was set aside.

4. In conclusion, the Tribunal ordered the appellant to pay interest as per the ruling but set aside the penalty under Section 11AC. The appeal was disposed of in accordance with these terms.