2017 (2) TMI 616 - AT - Central Excise

CENVAT credit - the appellant has not reversed the credit for the relevant period when the timber logs/inputs were removed as such - Held that - there is irregular availment of credit for which the demand has been rightly raised. It is to be noted that the appellant has paid an amount of ₹ 1,10,504/- immediately on being pointed out by the audit party. However, since the ER-1 returns do not reflect the non-reversal of the credit when the inputs were removed as such, the SCN issued invoking extended period of time is proper - the penalty of equal amount is unjustified and requires to be revised to the period beyond the normal period - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Irregular availment of CENVAT credit on duty paid timber logs.
2. Failure to reverse credit on timber logs removed as such.
3. Validity of demand invoking the extended period.
4. Imposition of penalty and interest.

Analysis:
1. The appellants, engaged in the manufacture of Veneers and Plywood, imported logs as inputs for their final products, availing CENVAT credit on duty paid on the timber logs. However, they failed to reverse the credit on timber logs removed as such for some periods, leading to the demand of ?2,45,126/- for irregular availment of credit. The original authority confirmed the demand along with interest and imposed an equal amount of penalty, which was later challenged in appeal.

2. The appellant's counsel argued that the failure to reverse the credit on timber logs was due to a bona fide mistake and not willful suppression. The appellant had paid the amount immediately upon being pointed out by the audit party, contending that the penalty imposed was unjustified. The argument emphasized that the demand invoking the extended period was not sustainable.

3. The Assistant Commissioner reiterated the findings, stating that the failure to reverse the credit on inputs removed as such amounted to willful suppression with the intent to evade duty payment. The non-reversal of credit led to discrepancies in the ER-1 returns, justifying the demand raised invoking the extended period.

4. Upon considering the submissions, the tribunal found that while there was irregular availment of credit, the penalty imposed was unjustified. The tribunal held that the appellant's immediate payment upon detection by the audit party indicated a lack of willful suppression. The tribunal modified the impugned order, setting aside the equal penalty and revising it to the duty pertaining to the extended period only. The appellant was directed to pay a proportionate penalty for the extended period, partly allowing the appeal with consequential reliefs.