2018 (2) TMI 1663 - AT - Central Excise

Whether the appellant is required to pay penalty for wrong availment of Cenvat credit which was later reversed by them before being pointed out by the department? Held that - admittedly the appellant had initially availed Cenvat credit twice on the same input invoice which they later reversed voluntarily before being pointed out by the department. Also, they have paid the interest of ₹ 1,12,796/- being pointed out by the audit department. When the entire amount of credit was reversed by the appellant before being pointed out by the department alongwith interest, therefore, imposition of penalty equal to the credit availed is untenable in law - appeal allowed in part.

Summary

Issues Involved:
1. Appeal against order-in-appeal regarding penalty and interest for wrong availment of Cenvat credit.

Analysis:
The appeal in this case was against an order-in-appeal passed by the Commissioner (Appeals) of Central Excise and Service Tax-Surat-II, concerning the imposition of a penalty and interest amounting to &8377; 5,64,813/- and &8377; 1,12,796/- respectively for the incorrect availment of Cenvat credit, which was subsequently reversed by the appellant before being pointed out by the department.

The appellant's representative argued that the appellant had inadvertently availed Cenvat credit twice on the same input invoice, but upon realizing the error, they voluntarily reversed the credit amount before any intervention from the department. It was further contended that since the credit was not utilized during the relevant period due to a sufficient balance in their CENVAT Register, no interest should be payable. Additionally, it was argued that since the credit amount was voluntarily reversed along with interest before any departmental intervention, no penalty should be imposed.

The Revenue's representative, on the other hand, referred to a previous Tribunal decision regarding the levy of interest on erroneously availed but unused credit, emphasizing that interest is applicable for the normal period. The Revenue argued that since the appellant had already reversed the credit and paid interest, a show cause notice was issued for the appropriation of the amount paid and proposing a penalty. Therefore, the contention that no interest is payable was deemed meritless.

Upon examination, the Tribunal found that the appellant had indeed availed Cenvat credit twice on the same input invoice, which was later voluntarily reversed before any departmental intervention. The appellant had also paid the interest amount as pointed out by the audit department. The Tribunal opined that since the entire credit amount was voluntarily reversed by the appellant along with interest before any departmental intervention, the imposition of a penalty equal to the availed credit was legally untenable. Regarding the levy of interest on the inadmissible credit, the Tribunal referenced a previous case and held that interest is payable even if wrongly availed credit is not utilized.

Consequently, the impugned order was modified to exclude the imposition of a penalty, and the appeal was partly allowed.