2018 (3) TMI 1608 - AT - Central Excise

CENVAT Credit - reversal of credit on inputs cleared as such - demand of duty with interest and penalty - Held that - On perusal of the copy of ER-1 returns furnished along with the appeal records, it is seen that the appellant has disclosed the entire details of inputs cleared as such - As the ER-I returns clearly show the details of inputs cleared as such, the appellant cannot be saddled with suppression of facts with intent to evade payment of duty. The allegation of double credit availed is explained by the appellant that it was due to an inadvertent mistake. The impugned order is modified to the extent of setting aside the penalty alone without disturbing the confirmation of duty or the interest thereon - appeal allowed in part.

Summary

Issues:
1. Failure to pay the amount equivalent to the credit availed on imported CENVAT inputs.
2. Reversal of lesser credit amount than availed on the inputs.
3. Alleged violation of Rule 3(5) of CENVAT Credit Rules, 2004.
4. Non-inclusion of Special Additional Duty (SAD) in duty payable for imported components.
5. Demand confirmation, interest, and penalties imposed.
6. Contesting the penalty imposed.
7. Allegations of suppression of facts and intentional evasion of duty.
8. Explanation of errors due to software issues.
9. Challenge against penalty imposition.

Analysis:

1. The appellants were engaged in manufacturing Portable Air Compressors and light sources, availing CENVAT credit on inputs. They cleared imported inputs to other entities, availing credit on these inputs. However, discrepancies were found in the payment of duty equivalent to the credit availed, leading to a violation of Rule 3(5) of CENVAT Credit Rules, 2004.

2. The appellants failed to reverse the correct amount of credit availed on imported inputs cleared, specifically regarding the Special Additional Duty (SAD) component. This discrepancy was noticed during verification, prompting the issuance of a show cause notice for recovery of the differential duty, interest, and penalties.

3. The appellant contended that the errors in duty payment were due to software issues, specifically the SAP system used by them. They argued that the discrepancies were unintentional and promptly rectified upon identification. The appellant maintained that there was no deliberate intention to evade duty payment.

4. The Tribunal observed that the appellant had disclosed all relevant details in their ER-1 returns, indicating no intent to suppress facts or evade duty payment. The explanation provided regarding the inadvertent mistake in availing double credit was found acceptable upon review of records.

5. Consequently, the Tribunal set aside the penalty imposed, noting that the appellant had rectified the errors promptly upon identification. The appeal was partly allowed, modifying the impugned order to exclude the penalty while upholding the confirmation of duty and interest.

In conclusion, the judgment addressed issues related to duty payment discrepancies, software errors, allegations of suppression of facts, and the imposition of penalties. The Tribunal found in favor of the appellant, setting aside the penalty based on the explanations provided and the prompt rectification of errors.