2017 (1) TMI 298 - AT - Central Excise

Interest for delayed reversal of credit - imposition of penalty - removal of chassis to the sister concern - bonafide belief that no duty is required to be paid when the goods sent to one s own Unit - whether demand of interest justified? - Held that - on pointing out the irregularity by the Audit Wing, since the cenvat amount was promptly reversed by the appellant before issuance of show cause notice, I am of the view that in terms of the decision of this Tribunal in the case of Paper Products Ltd. 2012 (12) TMI 738 - CESTAT AHMEDABAD , no interest is payable by the appellant. This case is revenue neutral inasmuch as had the cenvat credit been reversed, the same would have been eligible for credit to the sister unit - there is no loss of Revenue to the Government Exchequer, and as such, there is no question of compensating the Government for loss of any Revenue. Imposition of penalty under sub-rule (1) of Rule 15 ibid - Held that - since the authorities below have not specifically allege that wrong cenvat credit has been availed by the appellant, I am of the view that sub-rule (1) of Rule 15 ibid cannot be invoked in the facts and circumstances of this case for imposition of penalty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Non-reversal of cenvat credit on chassis cleared to sister unit
- Liability for interest on delayed reversal of cenvat credit
- Imposition of penalty under Cenvat Credit Rules

Analysis:
1. Non-reversal of Cenvat Credit: The appellant, engaged in manufacturing motor vehicles, did not reverse the cenvat credit taken on chassis when clearing them to a sister unit. The Audit Wing highlighted this oversight, leading to a show cause notice for recovery of interest and penalty. The appellant promptly reversed the cenvat credit upon notification by the Audit Wing, maintaining that the oversight was not intentional but due to a mistaken belief. The Tribunal, citing a precedent, ruled that since the reversal was made before the show cause notice, no interest was payable, and the situation was revenue-neutral as the sister unit could have availed the credit.

2. Liability for Interest: The Tribunal emphasized that the appellant's immediate reversal of the cenvat credit upon detection of the oversight absolved them from paying interest. The Tribunal's decision was influenced by the lack of malicious intent and the revenue-neutral nature of the situation, where no loss to the government exchequer occurred due to the prompt rectification.

3. Penalty Imposition: The adjudicating authority had imposed a penalty under Rule 15(1) of the Cenvat Credit Rules, which pertains to wrongly taken credits. However, since there was no specific allegation of wrongful availing of cenvat credit by the appellant, the Tribunal held that the penalty provision could not be invoked. The Tribunal concluded that the penalty was not applicable in this case, as the circumstances did not warrant such punitive action.

In summary, the Tribunal allowed the appeal in favor of the appellant, emphasizing the prompt reversal of cenvat credit upon detection of the oversight, the revenue-neutral aspect of the situation, and the absence of grounds for imposing a penalty under the Cenvat Credit Rules.