2016 (8) TMI 623 - AT - Central Excise

Period of limitation - Whether the show cause notice is barred by limitation or not - show cause notice issued by invoking the extended period of limitation and only defence taken by the appellant that due to inadvertent mistake, they could not reverse the credit of AED - Held that - the appellant has taken the credit of CVD and AED at the time of procurement of inputs. The appellant is required to reverse the credit of CVD as well as AED at the time of clearance of inputs as such but the appellant has not reversed the credit of AED. No satisfactory explanation has been given by the appellant. Moreover, the appellant admitted their liability that they have availed credit inadvertently and reversed the same only on pointing out by the Audit. If audit could not take place then this inadmissible credit availed by the appellant could not be detected. Therefore, the extended period of limitation is rightly invoked and the amount of AED reversed by the appellant is confirmed and appropriated. Whether the interest is payable by the appellant for intervening period or not - Held that - as already observed that the appellant has not utilized the credit pertaining to AED during the intervening period, therefore, the appellant is not required to pay interest for the intervening period in view of the decision of Hon ble Karnataka High Court in the case of Bill Forge Pvt.Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT . Whether the appellant is required to be penalized or not - Held that - as the extended period of limitation is invokable, I hold that the penalty is impossible on the appellant. I also find that as the appellant already reversed the credit before issuance of cause notice, in that circumstance, the penalty is reduced to 25% of the inadmissible credit availed by them. Therefore, the penalty is reduced to 25% of the amount of duty involved. - Appeal disposed of

Summary

Issues:
1. Whether the show cause notice is barred by limitation or not.
2. Whether the interest is payable by the appellant for the intervening period or not.
3. Whether the appellant is required to be penalized or not.

Analysis:

Issue 1:
The show cause notice was issued invoking the extended period of limitation. The appellant argued that due to inadvertent mistake, they could not reverse the credit of AED. However, the appellant admitted liability for not reversing the credit of AED, which was detected during an audit. The tribunal held that the extended period of limitation was rightly invoked as the appellant failed to provide a satisfactory explanation for not reversing the credit. Therefore, the amount of AED reversed by the appellant was confirmed and appropriated.

Issue 2:
Regarding interest payment, it was noted that the appellant did not utilize the credit related to AED during the intervening period. Citing a precedent from the Hon'ble Karnataka High Court, the tribunal ruled that the appellant was not liable to pay interest for the intervening period since the credit was not utilized.

Issue 3:
On the question of penalty imposition, the tribunal found that the extended period limitation was applicable. However, considering that the appellant had already reversed the credit before the show cause notice was issued, the penalty was reduced to 25% of the inadmissible credit availed by the appellant. Therefore, the penalty amount was reduced to 25% of the duty involved.

In conclusion, the tribunal disposed of the appeal based on the above findings, confirming the reversal of AED credit, determining no interest payment obligation for the intervening period, and reducing the penalty to 25% of the inadmissible credit amount.