2017 (2) TMI 1136 - AT - Central Excise

Reversal of CENVAT credit - Rule 3(5) of the CCR 2004 - clearance of inputs as such - interest - penalty - Held that - on realisation that the appellant has wrongly availed the credit of SAD has reversed the same. Later on the SCN was issued. In that circumstances mala-fide intention of the appellants are missing therefore no penalty is imposable on the appellant. Interest - Held that - The fact that whether the appellant was having sufficient balance in their cenvat credit account or not is to be verified by the adjudicating authority therefore the matter is remanded back to the adjudicating authority to verify the fact that during the impugned period the appellant was maintaining sufficient balance in their cenvat credit account. If there was sufficient balance in their cenvat credit account the demand of interest is not sustainable. Appeal allowed by way of remand.

Summary

Issues:
Appeal against order demanding interest and imposing penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with section 11AC of the Central Excise Act, 1944.

Analysis:
1. The appellant, engaged in manufacturing motor vehicle parts, failed to reverse cenvat credit on additional duty of customs (SAD) as required by Rule 3(5) of the Cenvat Credit Rules, 2004. Upon realizing the error, the appellant reversed the credit. Subsequently, a show cause notice was issued, leading to the demand of interest and penalty. The appellant contested the demand of interest, arguing that Rule 14 of the Cenvat Credit Rules, 2004 was not proposed in the show cause notice, thus cannot be invoked at the adjudication stage for recovery of interest.

2. Citing a precedent (L.G. Electronics Pvt. Ltd.), the appellant argued that if cenvat credit is reversed before the show cause notice is issued, Rule 14 cannot be invoked. Since Rule 14 was not invoked in this case, the demand for interest was deemed inappropriate. Additionally, the appellant claimed that due to sufficient unutilized balance in their cenvat credit account, interest and penalty should not be imposed, referring to the decision in Bill Forge Pvt. Ltd.

3. The respondent, however, supported the findings of the impugned order. After hearing both sides, the Tribunal considered the appellant's actions as lacking any mala-fide intention since the appellant rectified the credit error upon realization. The Tribunal remanded the case to the adjudicating authority to verify if the appellant indeed had sufficient balance in their cenvat credit account during the relevant period. If proven, the demand for interest would not be sustainable. No penalty was deemed applicable in this case. The appeal was disposed of by remand for further verification and appropriate order issuance.