2017 (10) TMI 961 - AT - Central Excise

Penalty u/s 11AC - the appellant availed CENVAT credit in June 2007 in respect of input service which was received before 10.09.2004 when the Cenvat Credit Rules, 2004 was not in existence - credit was already reversed - Held that - Considering the fact that the appellant is Govt. of India undertakeing and there cannot be any malafide intention, the appellant made out a strong case for waiver of penalty - penalty set aside - demand of credit with interest upheld - appeal allowed in part.

Summary

Issues:
1. Availment of CENVAT credit before the existence of Cenvat Credit Rules, 2004
2. Contest on penalty imposed under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004

Analysis:
1. The appellant availed CENVAT credit in June 2007 for an input service received before 10.09.2004 when the Cenvat Credit Rules, 2004 were not in existence. A show-cause notice was issued for the denial of CENVAT Credit, leading to disallowance in the order-in-original. The Commissioner (Appeals) upheld this decision, prompting the appellant to appeal.

2. The appellant did not contest the demand for CENVAT credit paid on 10.01.2009, which was appropriated in the order-in-original. The focus of contention was the penalty imposed under Section 11AC of the Central Excise Act, 1944. The appellant, a Government of India undertaking, claimed that the CENVAT credit was inadvertently availed without any malafide intention. The appellant argued that being a significant revenue contributor, there was no motive to evade a small amount of ?82,381. The appellant cited relevant judgments to support their case.

3. The Revenue, represented by the Assistant Commissioner, reiterated the findings of the impugned order and referenced specific judgments to strengthen their position.

4. The presiding Judicial Member carefully considered the submissions and records. It was noted that there was no dispute regarding the payment of the demanded CENVAT credit. The appellant's plea for waiving the penalty under Section 11AC was based on the absence of malafide intention due to the nature of being a Government undertaking. Comparisons were drawn with cited judgments where penalties were dropped in similar circumstances. The Judicial Member distinguished the judgments relied upon by the Revenue, emphasizing the unique aspect of the appellant being a Government entity. Consequently, the penalty under Section 11AC was set aside due to the absence of malafide intent, while upholding the demand for CENVAT credit and associated interest. The appeal was partially allowed based on the above considerations.