2016 (9) TMI 838 - AT - Central Excise

Imposition of penalty - Section 11AC of the Central Excise Act, 1944 - appellant have reversed the CENVAT credit and interest before issuance of show cause notice - Held that - it is not disputed that they have reversed the CENVAT credit immediately on being pointed out by the Audit. Subsequently, they have also paid the interest. Both were done before the issuance of show cause notice. In the peculiar facts and circumstances of the instant case, the matter should have been concluded in accordance with the provisions of Section 11 A(2B) and there was no need for issuance of show cause notice, much lesser any imposition of penalty under Section 11 AC. Hence, the imposition of penalty under Section 11AC in the impugned order-in-original is not maintainable and the impugned order is modified to the said extent. - Decided in favour of appellant

Summary

Issues Involved:
Whether penalty under Section 11 AC of the Central Excise Act, 1944, is imposable on the appellants even after they reversed the CENVAT credit and interest before the issuance of the show cause notice.

Analysis:
The issue in this case revolves around the imposition of a penalty under Section 11 AC of the Central Excise Act, 1944, on the appellants who had reversed the wrongly availed CENVAT credit and interest before the show cause notice was issued. The appellants argued that as per Section 11 A(2B), there was no necessity for the issuance of a show cause notice. They contended that the penalty should not be imposed as they had rectified the irregularity promptly upon detection by the Audit Party.

On the other hand, the Revenue's Authorized Representative argued that the appellants, being Central Excise Assessees, should have been aware of the rules and regulations regarding CENVAT credits. He highlighted that the appellants had a history of irregularly taking and reversing credits, sometimes on their own and sometimes upon detection. The Revenue contended that the penalty was justified due to the repeated irregularities committed by the appellants.

Upon careful consideration of both arguments and a review of the records, the Tribunal found merit in the appellants' submissions. It was acknowledged that the appellants had promptly rectified the irregularity by reversing the CENVAT credit and paying the interest before the show cause notice was issued. In light of the circumstances and the provisions of Section 11 A(2B), the Tribunal concluded that there was no basis for the issuance of the show cause notice or the imposition of a penalty under Section 11 AC. Consequently, the Tribunal held that the penalty imposed in the impugned order was not sustainable, and the order was modified accordingly.

In conclusion, the appeal was allowed, and the Tribunal ruled in favor of the appellants, emphasizing that the penalty under Section 11 AC was not applicable given the timely rectification of the irregularity by the appellants before the issuance of the show cause notice.