2016 (9) TMI 1053 - AT - Central Excise

Imposition of penalty - inadmissible availment/utilization of Cenvat credit in the name of Baddi unit - documents issued by the head office and Baddi branch as distributor of services - Baddi was a tax free zone and therefore, goods manufactured by the assessee in their Baddi unit were exempted from payment of duty - appellant paid inadmissible credit voluntarily - Held that - the assessee had deposited the amount only when based on specific information , the Department caught them. Had there being voluntary payment on the appellant s part, without any action on the part of the Department, they might have deposited the said amount earlier. It may mention that the assessee had already accepted their guilt by depositing the excise duty. The case is not fit for reduction of penalty to any extent. In the instant case, the surrender is not voluntary and levy of penalty is justified as per the ratio laid down by Hon ble Supreme Court in the case of UOI vs. Dharmendra Textile Processors 2008 (9) TMI 52 - SUPREME COURT . - Decided against the appellant

Summary

Issues:
- Distribution of inadmissible cenvat credit from a tax-exempt unit to another unit.
- Bonafide mistake defense for penalty imposition.
- Voluntary payment of inadmissible credit.
- Justification of penalty imposition based on specific information.

Analysis:
1. Distribution of Inadmissible Credit:
The case involved the distribution of inadmissible cenvat credit from a tax-exempt unit to another unit. The appellant's Baddi unit wrongly distributed ineligible credit to the Malanpur unit, totaling a significant amount. The Department discovered this distribution and found that the Baddi unit had availed/utilized inadmissible cenvat credit. The appellant claimed to have made a voluntary payment of the inadmissible credit only after being caught by the Department based on specific information.

2. Bonafide Mistake Defense:
The appellant argued that the distribution of inadmissible credit was a bonafide mistake without any malafide intention. The appellant claimed that the credit was inadvertently distributed to them and that they made a payment suo motu upon realizing the error. However, the Department's stance was that the payment was made only after they were caught, indicating that the surrender was not voluntary. The appellant had already accepted their guilt by depositing the excise duty, leading to the justification of penalty imposition.

3. Voluntary Payment and Penalty Justification:
The Tribunal considered the appellant's argument of a bonafide mistake but emphasized that the payment was made only after the Department intervened. The Tribunal cited a Supreme Court case to support the justification of penalty imposition in such cases where the surrender is not voluntary. The Tribunal found no merit in the appellant's case for a reduction in penalty and dismissed the appeals.

In conclusion, the judgment highlighted the importance of voluntary compliance and the consequences of not rectifying errors proactively. The Tribunal upheld the penalty imposition based on the specific circumstances of the case, emphasizing the need for accountability and adherence to tax regulations.