2015 (11) TMI 211 - AT - Central Excise

Suo moto reversal of credit before issuance of SCN - Interest u/s 11AB - Imposition of penalty - Held that - It come to the notice regarding the short payment, non payment of duty during the audit of the appellant s record as a result appellant suo moto paid the entire duty and not contesting the same. The Revenue has not issued any show cause notice for demand of duty and appropriation of the amount already paid by the appellant. - under this section duty is determined by the Central Excise Officers after considering representation made by the person on whom notice is served under subsection(1). In the present case neither any notice was issued under Section 11A(1) nor Central Excise Officers has determined the duty short paid / not paid under subsection (2) of Section 11A as is evident from the proceedings that no show cause notice under Section 11A(1) was issued nor any adjudication in respect of short payment or non payment of duty has been made, therefore ingredients required under Section 11AC inasmuch as issuance of show cause notice under Section 11A(1) and determination of duty under Section 11A(2) was not carried out by the department, therefore penalty under Section 11AC could not have been imposed. - penalty under Rule 173Q, I find that since the appellant has not paid duty or availed Cenvat Credit wrongly they have contravened provision of Central Excise Rules, therefore, they are liable to penalty under Rule, 173Q, hence penalty of ₹ 10,000/- imposed under Rule 173Q is hereby upheld. As regard the interest, since there is admitted wrong availment of Credit and though the same was paid on pointing out by the audit officer but paid only belatedly, the same attract interest unavoidably. From the date of availement of Modvat credit and not from the utilization of wrong availement of credit. Following the ratio of the Hon ble Supreme Court decision in the case of Ind-swift, I upheld the demand of interest as provided under Seciton 11AB at the relevant time - Interest under Section 11AB as confirmed - penalty imposed under Rule 173Q is upheld - However, Penalty under Section 11AC is dropped - Decided partly in favour of assessee.

Summary

Issues:
1. Appellant's liability for penalty and interest on Cenvat Credit discrepancies.

Analysis:
The appeal was against an Order-in-Appeal upholding the Order-in-Original imposing penalties and interest on the appellant for discrepancies in Cenvat Credit. The appellant voluntarily paid the duty before any show cause notice was issued. The appellant argued that since the duty was paid without protest and before any notice, penalties should not have been imposed. The appellant contended that no show cause notice was issued for demanding duty, which had already been paid, hence penalty should not apply.

The Revenue, represented by the Assistant Commissioner, supported the penalties imposed in the impugned order. The Tribunal carefully considered both sides' submissions and reviewed the record. It noted that the appellant had paid the entire duty suo moto upon audit findings without contesting it. The Revenue did not issue a show cause notice for demanding duty or appropriating the amount already paid by the appellant.

The Tribunal analyzed the relevant legal provisions, specifically Section 11AC of the Central Excise Act, which allows for penalties in cases of short-levy or non-levy of duty due to various reasons. However, it noted that for penalty under Section 11AC to apply, duty must be determined under Section 11A(2). The Tribunal highlighted that in this case, no notice was issued under Section 11A(1) nor was duty determined by Central Excise Officers under Section 11A(2). Therefore, it concluded that penalty under Section 11AC could not have been imposed due to the lack of required procedures by the department.

Regarding the penalty under Rule 173Q, the Tribunal found the appellant liable as they had contravened Central Excise Rules by not paying duty or availing Cenvat Credit correctly. Thus, the penalty of Rs. 10,000 under Rule 173Q was upheld. As for interest, the Tribunal upheld it due to the admitted wrongful availment of Credit, even though it was paid belatedly. Citing a Supreme Court decision, the Tribunal confirmed the demand for interest under Section 11AB.

In conclusion, the Tribunal upheld the interest under Section 11AB and the penalty of Rs. 10,000 under Rule 173Q but dropped the penalty under Section 11AC, as it was wrongly imposed due to procedural deficiencies.