2008 (8) TMI 225 - AT - Central Excise

Credit on capital goods - appellant was required to take 50% of the credit in the year the capital goods received and the balance 50% in next financial year - appellant took the entire credit in the same financial year held that interest is required to be confirmed from the date of availment of credit till the date of their entitlement to avail credit that is till 1-4-2001 facts were already in knowledge of dept. so there is no mala fide on part of appellant so penalty not imposable

Summary

Issues: Dispute over availment of Modvat credit for capital goods; Imposition of interest and penalty; Appeal against Deputy Commissioner's order.

Analysis:
1. The dispute in this case revolves around the availment of Modvat credit by the appellant concerning capital goods received in the financial year 2000-01. The appellant was supposed to take 50% of the credit in that year and the remaining 50% in the subsequent financial year starting from 1-4-2001. However, the appellant took the entire credit before 1-4-2001, which went unnoticed initially. It was only later, due to an audit objection in April 2004, that the discrepancy was discovered. Consequently, the appellant reversed the credit in 2004 and retook it on the same day. Subsequently, a show cause notice was issued in December 2005, leading to the Deputy Commissioner's order confirming interest and imposing a penalty of Rs. 10,000.

2. The appellant's argument is centered on the fact that although they availed the full credit in the initial year, only 50% was utilized, with the remaining 50% utilized in the subsequent year. They assert that the unutilized credit was merely a paper entry and should not attract penal action. The appellant contends that they were entitled to avail the balance 50% credit by 1-4-2001, and any interest should be calculated until that date, which they estimate to be around Rs. 1300. The appellant, acknowledging the small amount, expresses readiness to pay the interest.

3. The Member (J) acknowledges the appellant's argument and directs the Authorities to calculate the interest from the date of credit availment until 1-4-2001 when the appellant was entitled to take Cenvat credit. Not attributing any malicious intent to the appellant, as they had filed the necessary return and brought the unutilized credit to the Revenue's attention, the Member (J) deems it inappropriate to impose a penalty. Consequently, the penalty is set aside, and the appeal is disposed of through remand, with the stay petition also being resolved. The judgment emphasizes the absence of malicious intent and the appellant's proactive disclosure of information to the Revenue as mitigating factors in the decision-making process.