2018 (2) TMI 138 - AT - Central Excise

Demand of interest and penalty - - Held that - It is not disputed that the appellant has reversed the credit before utilization - similar issue decided in the case of The Commissioner of Central Excise, Madurai Versus M/s. Strategic Engineering (P) Ltd. 2014 (11) TMI 89 - MADRAS HIGH COURT , where it was held that it is an admitted fact that Rule 14 of the Cenvat Credit Rules has been subsequently amended, wherein it has been clearly stated as taken and utilised . Therefore it is quite clear the mere taking itself would not compel the assessee to pay interest as well as penalty. The demand of interest and penalty cannot legally sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of excess input credit
- Demand of interest and penalty

Availment of Excess Input Credit:
The appellants, engaged in manufacturing multiplexers, were found to have availed excess input credit on items like PCB assembly cards, cable assembly, and chassis. The investigation revealed that the appellants were manually entering the value of each input invoice in an MS Excel Worksheet, calculating the eligible credit based on a formula in the worksheet, and availing excess credit. The original authority confirmed the demand to recover the wrongly availed credit, along with interest and penalty. The appellant, not contesting the credit demand, argued that the excess credit was due to accounting errors during the transition from Tally software to SAP. They reversed the credit before utilization, had sufficient balance in the CENVAT account, and had no intention to gain undue advantage. Citing a jurisdictional High Court decision, the appellant pleaded for setting aside the demand of interest and penalties.

Demand of Interest and Penalty:
The appellant contested the demand of interest and penalties imposed by the original authority. The appellant had reversed the excess credit before utilization, and the jurisdictional High Court decision cited by the appellant analyzed a similar issue, holding that the demand of interest and penalties could not be sustained. The High Court decision discussed the applicability of Rule 14 of the Cenvat Credit Rules, emphasizing that mere availing of credit was not sufficient for claiming interest and penalty. The subsequent amendment to Rule 14 clarified that mere availing did not compel payment of interest and penalty. Based on the High Court decision and subsequent amendment, the Tribunal held that the demand of interest and penalty could not be legally sustained. Consequently, the Tribunal modified the impugned order, setting aside the demand of interest and penalty while upholding the demand for excess credit availed and its appropriation. The appeal was allowed in favor of the appellant.