2016 (12) TMI 977 - AT - Central Excise

Cenvat credit - Penalty - credit of another unit availed - suppression of facts - Rule 15 (2) of the Cenvat Credit Rules, 2004 - Held that - the appellant has to be given benefit of doubt that its improper availment of credit was only on account of inadvertent error. It is also to be kept in mind that the credit per se was not ineligible, rather only its availment by Unit-I was - Appellant has reversed the irregularly availed credit along with interest thereof on being pointed out by department - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Improper availment of cenvat credit, Allegation of suppression of facts, Imposition of equal penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC.

Analysis:

1. Improper Availment of Cenvat Credit:
The case involved M/s. Xomox Sanmar Ltd. (Unit-I) availing cenvat credit of ?12,91,728 for the period Oct 2008 to Jan 2009, which was related only to Unit-II. The appellant reversed the wrongly taken credit along with interest upon department notification. The issue was whether the appellant's improper availment of credit was due to inadvertent error or willful misdeclaration.

2. Allegation of Suppression of Facts:
The department alleged that the appellant suppressed the fact of non-availing certain services and wrongly availed cenvat credit with the intent to evade duty. The lower appellate authority upheld the original authority's decision of demanding duty amounts, interest, and imposing an equal penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC.

3. Imposition of Equal Penalty:
The appellant argued that the improper credit availment was due to inadvertent error and not fraud, suppression, or collusion. The department contended that the appellant's actions amounted to misdeclaration and suppression of facts, justifying the imposition of an equal penalty. The issue was whether the penalty imposed was justified under the circumstances.

4. Judgment:
After considering the arguments and facts, the tribunal found that the appellant's improper credit availment was indeed due to inadvertent error. The tribunal noted that the units were adjacent, and the credit would have been eligible if availed by Unit-II. As the appellant rectified the mistake upon notification and there was no willful misdeclaration, suppression of facts, or fraud, the tribunal held that the penalty imposed was not sustainable. The tribunal set aside the penalty and allowed the appeal.

In conclusion, the tribunal ruled in favor of the appellant, finding that the imposition of an equal penalty was not justified due to the inadvertent nature of the error in availing cenvat credit. The judgment emphasized the importance of considering the circumstances and intent behind the improper credit availment before imposing penalties under the relevant provisions of the law.