2017 (9) TMI 146 - AT - Central Excise

Whether the differential amount i.e. ₹ 8,17,408/- availed as excess credit on the imported inputs in discharging the transaction value cleared as such as confirmed in the orders are correct or otherwise and also whether imposition of penalty in the facts and circumstances of the case is justified or otherwise? Held that - substantial evidence could not be placed to establish that the correct amount should have been ₹ 6,6,419/- instead of ₹ 8,17,408/-, demand upheld - penalty is unwarranted inasmuch as the appellant had cleared the imported inputs as such on payment of duty on the transaction value and disclosed in their monthly return, meticulously, and also keeping in view of the fact that the appellant is willing to discharge the differential credit along with interest - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
- Compliance with Rule 3(5) of Cenvat Credit Rules, 2004
- Correct computation of differential credit availed on imported inputs
- Imposition of penalty

Compliance with Rule 3(5) of Cenvat Credit Rules, 2004:
The case involved the appellant, engaged in manufacturing excisable goods, availing CENVAT credit on imported inputs and later clearing some of these inputs to their sister concern and other parties. The dispute arose as the appellant failed to reverse the credit availed on such cleared inputs, leading to a demand of ?8,17,408. The appellant contended that the computation of the differential credit was erroneous due to a mistaken belief and produced a Chartered Accountant certificate to support their claim. The appellant acknowledged the error and expressed willingness to discharge the amount with interest. The Tribunal examined the facts and concluded that the penalty was unwarranted considering the appellant's disclosure in monthly returns and their readiness to rectify the error.

Correct computation of differential credit availed on imported inputs:
The primary issue was whether the differential amount of ?8,17,408 availed as excess credit on imported inputs for clearing goods was correctly determined by the authorities. The appellant argued that the Department's computation was incorrect, suggesting the correct amount should have been ?6,6,419. Despite the lack of substantial evidence to establish the exact amount, the Tribunal found no reason to interfere with the demand confirmed by lower authorities. The Tribunal emphasized that the penalty was not justified in the circumstances, especially since the appellant had diligently disclosed the transactions in their monthly returns and agreed to rectify the error by paying the differential credit along with interest.

Imposition of penalty:
Regarding the imposition of a penalty, the Tribunal deemed it unwarranted due to the appellant's transparent disclosure of transactions in monthly returns and their willingness to rectify the error by paying the differential credit with interest. The Tribunal noted that there was no mala fide intention on the appellant's part and that the penalty was not justified given the facts and circumstances of the case. Consequently, the Tribunal partly allowed the appeal by setting aside the penalty imposed, thereby modifying the impugned order.