2017 (12) TMI 1239 - AT - Central Excise

CENVAT credit - SAD @4% paid/reversed by M/s HSCIL and the credit was availed by the appellants - supplementary invoices - Sub-section (2B) of Section 11A of Central Excise Act, 1944 - Held that - provisions of Sub-section (2B) of Section 11A of Central Excise Act, 1944 are applicable since the explanation 1 below the said Sub-section is not invokable in the present case for the reason that Revenue could not establish that there was intention to pay less amount as compared to required amount because the whole exercise was revenue neutral - also, the question of imposition of penalty on said alleged violation does not arise - appeal allowed - decided in favor of appellant.

Summary

Issues:
Availment of Cenvat credit on CKD parts, admissibility of Cenvat credit of SAD, applicability of penalty under Rule 15(2) of Cenvat Credit Rules, 2004.

Availment of Cenvat credit on CKD parts:
The appellant, engaged in manufacturing automotive parts, received CKD parts from HSCIL for car production. HSCIL reversed Cenvat credit on CKD parts, except for 4% SAD Component due to a software error. The appellant availed credit based on supplementary invoices issued by HSCIL. An audit revealed discrepancies, leading to a show cause notice against HSCIL for recovery. The Tribunal found no intention to evade duty, making the exercise revenue neutral. The appellant's credit availed on HSCIL's invoices was deemed valid.

Admissibility of Cenvat credit of SAD:
The dispute revolved around the admissibility of Cenvat credit on the 4% SAD paid/reversed by HSCIL. HSCIL eventually reversed the entire credit amount on various components. The Tribunal ruled that the Revenue failed to establish any intention to pay less duty, deeming the situation revenue neutral. Consequently, the demand of INR 69,34,497 was set aside, along with the associated interest and penalty.

Applicability of penalty under Rule 15(2) of Cenvat Credit Rules, 2004:
The appellant argued that the penalty under Rule 15(2) applies when an assessee wrongly takes credit on inputs or capital goods subject to confiscation. Citing a similar case, the appellant contended that penalties do not apply in revenue-neutral scenarios. The Tribunal agreed, setting aside the penalty imposed on the appellant.

In conclusion, the Tribunal found in favor of the appellant, setting aside the demand, interest, and penalty associated with the Cenvat credit issue. The judgment highlighted the importance of intent in duty payment and clarified the applicability of penalties in revenue-neutral situations. The appellant was granted consequential relief as per the law.