2017 (1) TMI 289 - AT - Central Excise

Reversal of CENVAT credit - simultaneous availment of CENVAT credit as well as benefit of exemption N/N. 30/2004-CE dt. 9.7.2004 - demand of interest with imposition of penalty - extended period of limitation - Held that - the appellant has suppressed the fact regarding availment of credit despite they were claiming exemption under N/N. 30/2004-CE. The appellant was duty bound to reverse the credit on the clearance of the goods under said exemption which they failed to do so. The entire case was unearthed only after the visit of the factory by the officer. Therefore, it is established that there is a suppression of fact on the part of the appellant. In such case the demand was correctly confirmed under the proviso to Section 11A of the Act. Consequently, the equal amount of penalty under Section 11AC is also correct. As regards interest, since the appellant has failed to reverse the credit at the time of clearance of goods under exemption but the same was reversed belatedly after almost 3-4 years, interest is inevitably chargeable under Section 11AB of the Act, from the date of availment of credit till the date of reversal. Demand upheld - appeal dismissed - decided against assessee.

Summary

Issues:
1. Availing Cenvat Credit on inputs used in manufacturing exempted final products.
2. Imposition of penalty under Section 11AC of the Act.
3. Demand of interest on the availed credit.

Analysis:
Issue 1: The appellant availed Cenvat Credit on inputs used in manufacturing exempted final products, contrary to the conditions of the exemption notification. The officer detected this during a factory visit, leading to the reversal of the credit. The demand for duty equal to the availed credit on inputs was confirmed by invoking the extended period, as per the proviso to Section 11A of the Act. The appellant's failure to reverse the credit on clearance under exemption constituted suppression of fact, justifying the demand.

Issue 2: The appellant contested the imposition of penalty under Section 11AC of the Act. The appellant argued that most of the duty was paid before the show cause notice, and since they were not contesting the duty demand, the penalty should be waived. However, the Tribunal upheld the penalty, citing the mandatory nature of penal provisions and the appellant's failure to reverse the credit in a timely manner.

Issue 3: The demand for interest on the availed credit was challenged by the appellant. The Revenue argued that interest was chargeable from the date of availing the credit until its reversal, as per a Supreme Court judgment. The Tribunal agreed, emphasizing that the appellant's belated reversal of the credit after 3-4 years warranted the imposition of interest under Section 11AB of the Act.

In conclusion, the Tribunal upheld the impugned order, confirming the demand, penalty under Section 11AC, and the chargeability of interest. The appellant's failure to comply with the conditions of the exemption notification and timely reversal of credit led to the adverse judgment. The appeal was dismissed, citing precedents and legal provisions supporting the decision.