2017 (3) TMI 1213 - AT - Central Excise

Imposition of penalty - reversal of credit for obtaining the Terminal Excise Duty (TED) benefit from the DGFT - Held that - the appellant was entitled for the benefit of Terminal Excise Duty. However, the appellant had purchased the goods on payment of Central Excise Duty and availed cenvat credit of such duty paid on the capital goods. Since the appellant has reversed the cenvat credit before issuance of SCN and also paid interest attributable to such late reversal of cenvat credit, the penalty cannot be imposed on the appellant, in view of the fact that there was no element of suppression, fraud, collusion etc, with intent to avail wrong cenvat credit - penalty set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

Analysis:
The appeal was against an order passed by the Commissioner of Central Excise and Customs, Jaipur. The appellant, engaged in the manufacture of Electric Wires and Cables, imported capital goods under an EPCG license for the manufacture of power cables. The appellant paid Central Excise duty on the capital goods but later reversed the cenvat credit to obtain Terminal Excise Duty benefit. A Show Cause Notice was issued for recovery of interest, appropriation of cenvat reversal, and imposition of penalty. The appellant contended that the penalty was not justified as the payment of Central Excise duty and availing cenvat credit was a bona fide mistake and not due to fraud. The appellant had reversed the cenvat credit and paid the interest before adjudication. The Tribunal noted that the appellant was entitled to Terminal Excise Duty benefit without paying Central Excise Duty. As the appellant had reversed the cenvat credit before the show cause notice and paid the interest, the Tribunal held that penalty could not be imposed in the absence of suppression, fraud, or collusion. Consequently, the impugned order was set aside, and the appeal was allowed regarding the penalty imposed in the adjudication order.

This judgment highlights the importance of the intention behind actions in matters of Central Excise duty and cenvat credit. The Tribunal emphasized that penalty should not be imposed if there was no intent to avail wrong cenvat credit, especially when the appellant had rectified the situation by reversing the credit and paying the interest before adjudication. The decision underscores the significance of compliance with licensing conditions and the repercussions of errors in duty payments.