2018 (2) TMI 1671 - AT - Central Excise

Whether the appellant is required to pay penalty of ₹ 1,70,000/- and interest of ₹ 97,736/- for wrong availment of Cenvat credit of ₹ 17,97,052/- which was later reversed by them voluntarily 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 ₹ 97,736/- 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:
- Appeal against penalty and interest for wrong availment of Cenvat credit

Analysis:
The appeal in this case was filed against the order passed by the Commissioner (Appeals) regarding the imposition of a penalty and interest for the wrong availment of Cenvat credit. The main issue at hand was whether the appellant should pay a penalty of ?1,70,000/- and interest of ?97,736/- for wrongly availing Cenvat credit amounting to ?17,97,052/-, which was voluntarily reversed by them before being pointed out by the department.

The appellant's advocate argued that the appellant had mistakenly availed Cenvat credit on the same input invoices twice. However, upon realizing the error, they voluntarily reversed a significant portion of the credit before being notified by the Audit Team. The advocate contended that since the credit was not utilized during the relevant period and was reversed with interest before being discovered by the department, no penalty should be imposed.

On the other hand, the Revenue's representative referred to a previous Tribunal case, Atul Ltd & Others Vs CCE&ST, Rajkot, where it was held that interest on erroneous credit, even if not utilized, is payable. The Tribunal found that the appellant had indeed availed Cenvat credit twice on the same input invoice and also wrongly availed credit on trading activity, which was later voluntarily reversed. However, the appellant had not paid the interest amount of ?97,736/-. The Tribunal noted that there was no suppression of facts or misdeclaration established, and the entire credit amount was reversed before the issuance of any notice. Therefore, the Tribunal concluded that imposing a penalty equal to the availed credit amount was not legally tenable. Regarding the levy of interest on the inadmissible credit, the Tribunal upheld the view that interest is payable even if the wrong credit is availed but not utilized. Consequently, the impugned order was modified to exclude the penalty, and the appeal was partly allowed.

In summary, the Tribunal's decision focused on the voluntary reversal of the wrongly availed Cenvat credit before any notice was issued, leading to the conclusion that imposing a penalty equivalent to the credit amount was not justified. The Tribunal also reiterated the obligation to pay interest on erroneous credit, even if not utilized, based on previous case law.