2017 (12) TMI 1289 - AT - Central Excise

CENVAT credit - Bill of Entry for warehouse, on which since no duty is paid - Held that - credit was taken on the Bill of Entry for warehouse, obviously there cannot be intention to evade wrong credit for the reason that bill of entry for warehouse apparently is not meant for allowing credit therefore it is clear case of inadvertent availment of credit - case is squarely covered by Section 11A(2B) whereunder appellant was not suppose to be issued SCN and the case could have been concluded on the payment of Cenvat credit alongwith interest before issuance of SCN - penalty set aside - demand with interest upheld - appeal allowed in part.

Summary

Issues:
1. Wrong availment of Cenvat credit on Bill of Entry for warehouse.
2. Appropriation of the amount paid before show cause notice issuance.
3. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act.
4. Appeal for waiver of penalty under Section 11AC.
5. Adjudication by the Commissioner(Appeals) and subsequent appeal.

Analysis:
1. The appellant wrongly availed Cenvat credit on a Bill of Entry for a warehouse, where no duty was paid, making the credit inadmissible. The adjudicating authority confirmed the demand of Cenvat credit amounting to ?4,41,793. The appellant paid the amount along with interest before the show cause notice was issued, and it was appropriated against the demand. A penalty equal to the amount was imposed under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act. The appellant appealed only for the waiver of the penalty imposed under Section 11AC after the Commissioner(Appeals) upheld the original order.

2. The appellant's representative argued that the credit was mistakenly taken on the Bill of Entry for the warehouse without any malicious intent. Upon realizing the error, the appellant reversed the credit and paid interest before the show cause notice, contending that the penalty under Section 11AC was unwarranted. It was highlighted that the appellant maintained a balance in the Cenvat account greater than the wrongly availed credit amount, indicating no malicious intent.

3. The Revenue's representative reiterated the findings of the original order, supporting the imposition of the penalty.

4. After considering both sides' submissions, the judge noted that the credit was inadvertently taken on the Bill of Entry for the warehouse, indicating no intention to evade. The appellant promptly rectified the mistake by repaying the entire amount with interest. It was observed that the credit was not utilized from the time of its availment until its reversal, as evidenced by the maintained balance in the Cenvat account. The judge concluded that the case fell under Section 11A(2B), where no show cause notice should have been issued if the Cenvat credit was paid along with interest before such notice. Therefore, the penalty under Section 11AC was set aside, while the demand of ?4,41,793 along with interest was upheld.

5. The appeal was allowed based on the above findings, and the penalty under Section 11AC was revoked, maintaining the demand and payment of Cenvat credit along with interest.