2016 (8) TMI 752 - AT - Central Excise

Cenvat credit - ineligible credit taken wrongly - took Cenvat credit on basic customs duty, CVD, cess on textile and education cess instead of taking only on the countervailing duty and education cess as per law - appellant reversed the credit amount alongwith interest on being pointed out by the audit before issuance of SCN - Held that - the issue is no more res integra in view of the judgment of the Hon ble Karnataka High Court in the case of CCE, ST, LTU Bangalore Vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT and the decision of the Larger Bench in the case of JK Tyres & Industries Ltd. Vs. ACCE. It is a fact that the appellant has reversed the credit before utilization of the same and a small portion of the cenvat credit was utilized but the same was reversed along with interest before the issue of show-cause notice and in view of the judgment of this Tribunal in the case of Kumar Organics Product Ltd. Vs. CCE, Bangalore 2014 (12) TMI 273 - CESTAT BANGALORE , the appellant is not liable to pay interest as well as penalty. Therefore, by following the ratio of decisions cited supra, impugned order is not sustainable in law. - Decided in favour of appellant with consequential relief

Summary

Issues involved:
- Appellant availed incorrect cenvat credit leading to overdrawn amount
- Imposition of penalty under Section 11AC
- Demand of interest on the overdrawn amount
- Applicability of judgments in similar cases
- Limitation period for issuing show-cause notice for demand of interest

Analysis:

1. Incorrect Cenvat Credit and Overdrawn Amount:
The appellant inadvertently took cenvat credit of basic customs duty and cess on textiles on imported raw material, resulting in an overdrawn amount of Rs. 3,42,025/-. The officer responsible for excise matters mistakenly allowed this credit, which was later rectified by the appellant upon detection. The appellant reversed the credit balance before utilization, with only a small portion being utilized and subsequently reversed along with interest.

2. Imposition of Penalty under Section 11AC:
The Joint Commissioner imposed a penalty of Rs. 19,25,916/- under Section 11AC for alleged suppression with the intent to evade duty. The appellant contested this penalty, arguing that the reversal of credit before utilization, in line with relevant case laws, should absolve them from penalty liability. The appellant also highlighted that the show-cause notice was issued beyond the normal one-year period from the credit reversal date, challenging the validity of interest demand.

3. Applicability of Judgments and Legal Precedents:
The appellant relied on various judgments, including JK Tyre & Industries Ltd. and CCE, Madurai Vs. M/s. Strategic Engineering (P) Ltd., to support their case. These judgments emphasized the importance of timely credit reversal and the absence of penalty liability in such scenarios. The Tribunal considered these precedents, along with the Karnataka High Court's decision in CCE, ST, LTU Bangalore Vs. Bill Forge Pvt. Ltd., to rule in favor of the appellant.

4. Decision and Ruling:
After evaluating the arguments and legal precedents, the Tribunal, per S. S. Garg, concluded that the appellant's actions aligned with the legal requirements. The Tribunal found that the appellant had rectified the credit error before utilization, in accordance with established case laws. Consequently, the impugned order imposing penalty and interest was deemed unsustainable in law. The Tribunal allowed the appeal of the appellant, providing consequential relief as necessary.

In conclusion, the Tribunal's judgment favored the appellant, setting aside the penalty and interest demands based on the timely reversal of the incorrect cenvat credit. The decision underscored the importance of adherence to legal provisions and established case laws in matters concerning duty evasion and penalty imposition.