2016 (8) TMI 778 - AT - Central Excise

Demand - recovery of credit availed - irregularly availed 100% CENVAT Credit in the same year on capital goods viz Ingot moulds, Forged Rolls & Metal Rolls for the period 2005-06, 2006-07 & 2007-08 - Held that - the appellant is eligible to avail 50% credit in the subsequent year. In such case, there is no revenue loss and the availment of 100% credit in the same year of purchase is only a procedural lapse. The appellant has already paid the interest and penalty which in my opinion would suffice as compensation for the procedural lapse committed by them. In the present case there is no finding that appellant resorted to any contumacious conduct of reversal of irregular credit, on pointing out by department and had later on availing the same in the subsequent financial year. Further, as the appellant was eligible to avail the balance 50% in subsequent year, it cannot be said that there was any dishonest intention. The appellant prays to restore the adjudicating authority s order dated 29.10.2009. Taking into account the evidence and the fact that appellant has paid the interest and penalty, I am of the view that the demand/recovery of credit availed is not sustainable. - Decided in favour of assessee

Summary

Issues:
- Irregular availment of 100% CENVAT Credit on capital goods in the same financial year
- Demand of excess credit, interest, and penalty under CENVAT Credit Rules, 2004
- Appeal against the order of the original authority
- Interpretation of provisions regarding availment of CENVAT Credit
- Applicability of previous judgments in similar cases
- Consideration of procedural lapse and intent in availing credit

Analysis:
1. Irregular Availment of CENVAT Credit:
The case involved the irregular availment of 100% CENVAT Credit on capital goods in the same financial year by the respondents, which was found during a verification of records. The rule under CENVAT Credit Rules, 2004 stipulates that only 50% credit can be availed in the same financial year, with the balance to be taken in subsequent years.

2. Demand of Excess Credit, Interest, and Penalty:
A show cause notice was issued demanding the irregularly availed excess credit along with interest and proposing a penalty under section 11 AC of the Central Excise Act, 1944 read with Rule 15(2) of CCR, 2004. The original authority confirmed the demand for interest and imposed a penalty of ?2000 under Rule 15(2) of CENVAT Credit Rules, 2004.

3. Appeal Against Original Authority's Order:
The department appealed before the Commissioner (Appeals) who set aside the order of the original authority, leading to the present appeal.

4. Interpretation of Provisions and Previous Judgments:
The appellant contended that they are eligible to avail the credit in subsequent years, indicating no revenue loss, and argued that the demand for recovery of credit availed should be set aside. Reference was made to a judgment in Indian Oil Corporation Ltd. vs. CCE, [2005 (187) ELT 241 (J-Del)] to support this argument.

5. Consideration of Procedural Lapse and Intent:
The Tribunal considered the appellant's eligibility to avail 50% credit in subsequent years, acknowledging that there was no dishonest intention as the balance 50% could be availed later. The Tribunal noted that the appellant had paid the interest and penalty, which was deemed sufficient compensation for the procedural lapse. The decision was influenced by the absence of contumacious conduct and the fact that the appellant rectified the irregular credit by availing it in the subsequent financial year.

In conclusion, the Tribunal allowed the appeal, setting aside the demand for recovery of credit availed while upholding the confirmation of interest and penalty imposed by the original authority. The judgment emphasized the importance of procedural compliance and intent in availing CENVAT Credit, highlighting the significance of rectifying errors and paying appropriate penalties as compensation.