2018 (1) TMI 627 - AT - Central Excise

Whether the interest liability and penal provisions are attracted in respect of reversal of Cenvat credit availed in excess? - CENVAT credit on capital goods taken at 100% and is reversed on being pointed out - Held that - Apex Court in the case of Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court case has held that interest is leviable if the Cenvat credit has been wrongly taken but not utilised - the Adjudicating Authority has rightly upheld the levy of interest. Penalty - Held that - the Central Excise duty was imposed on coal for the first time in the year 2011. The dispute of wrong availment of Cenvat Credit on capital goods is for the period immediately after introduction of such Excise Duty - the mistake was inadvertent and unintentional - penalty set aside. Appeal allowed in part.

Summary

Issues involved:
1. Whether interest liability and penal provisions are attracted in respect of reversal of Cenvat credit availed in excess.
2. Whether the penalty imposed is justified.

Analysis:

Issue 1:
The appellant, engaged in coal production, availed excess Cenvat credit on capital goods during the disputed period. The Department demanded interest on the wrongly availed Cenvat credit and imposed a penalty equal to the total amount. The appellant argued that no interest should be paid as they had not utilized more than 50% of the credit and cited a relevant case. The Department justified the impugned order by referring to a Supreme Court decision. The Tribunal observed that the appellant had availed 100% credit on capital goods instead of 50% as per the rules, promptly reversed the excess credit, and focused on the payment of interest. Relying on the Supreme Court decision, the Tribunal upheld the levy of interest on the wrongly taken Cenvat credit, concluding that the Adjudicating Authority rightly imposed the interest.

Issue 2:
Regarding the imposition of penalty, the appellant claimed the mistake was unintentional, especially considering the introduction of Central Excise duty on coal around the same time as the disputed period. The Tribunal acknowledged the inadvertent and unintentional nature of the mistake, considering the circumstances, and set aside the penalty imposed on the appellant. Consequently, the Tribunal partly allowed the appeal, emphasizing the unintentional nature of the mistake in availing excess Cenvat credit on capital goods. The decision was pronounced in open court on a specific date.