2015 (10) TMI 1973 - AT - Central Excise

Denial of excess availed CENVAT Credit - discrepancy happened is on account of placement of decimal in the figures of duty reflected in the invoices - Imposition of penalty - Held that - Admittedly penalty is to be imposed in case an assessee acts with malafide intention and in a deliberate and contemptuous conduct. No doubt appellant had taken excess credit but the explanation offered by them is that this is on account of inadvertent mistake on the part of clerk responsible for maintaining records inasmuch as the same has occurred on account of change of place of the decimal in the figures of the credit. The appellants have paid interest to the extent of ₹ 3,81,412/-; which is penal in character. The observations of Commissioner (Appeals) that if not pointed out by the audit, the same would have gone unnoticed, do not attribute to the allegation of malafide to the appellant. In the absence of any evidence to show that there was malafide on the part of the assessee, I find that there is no justification for imposition of penalty upon the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Excessive availment of CENVAT credit by the appellant.
2. Imposition of penalty on the appellant for the excess credit availed.

Issue 1: Excessive availment of CENVAT credit by the appellant

The appellant, engaged in manufacturing forged automobile components, availed CENVAT credit of duty paid on capital goods and input services. An audit revealed discrepancies in the credit availed against specific invoices, where the appellant had taken significantly more credit than the actual amount due. The appellant attributed this to inadvertent errors by their clerical staff, citing the misplacement of decimal points in duty figures on invoices. Upon acknowledgment of the errors, the appellant promptly reversed the excess credit and paid interest of Rs. 3,81,412. The Revenue argued that without the audit, the excess credit would have gone unnoticed. The Tribunal noted that the errors were not deliberate or malicious, as evidenced by the absence of malafide intent on the part of the appellant. Considering the volume of documents handled monthly and the isolated nature of the errors, the Tribunal concluded that the excess credit was due to human error and not willful misconduct. Consequently, the Tribunal held that there was no justification for imposing a penalty on the appellant.

Issue 2: Imposition of penalty on the appellant for the excess credit availed

The question before the Tribunal was whether penalty should be imposed on the appellant for the excessive CENVAT credit availed. It was established that penalties are warranted in cases of deliberate and contemptuous conduct with malafide intentions. However, in this case, the appellant's explanation for the excess credit was inadvertent errors made by the clerical staff. The payment of interest amounting to Rs. 3,81,412 was considered penal in nature. The Commissioner's assertion that the errors would have gone unnoticed without the audit did not imply malafide intent on the part of the appellant. The absence of evidence indicating malafide conduct led the Tribunal to conclude that there was no basis for penalizing the appellant. The appellant's argument that handling a large number of documents monthly increased the likelihood of errors was accepted by the Tribunal, which viewed the mistakes as human errors rather than intentional misconduct. Consequently, the Tribunal set aside the penalty imposed on the appellant, allowing the appeal on that ground.

This detailed analysis of the judgment highlights the issues of excessive CENVAT credit availed by the appellant and the imposition of a penalty, providing a comprehensive understanding of the Tribunal's decision in this matter.