2018 (4) TMI 941 - AT - Central Excise

Penalty u/r 15 read with Section 11AC of the Act - it was alleged that appellant had taken excess credit on the basis of dealer s invoice - Held that - the appellant had reversed the excess credit before the issuance of SCN - the case is squarely covered by the precedent decision of this Tribunal in the case of M/s Prayas Casting Ltd. 2012 (7) TMI 2 - CESTAT, AHMEDABAD , where it was held that Having reversed the ineligible availmaint of the CENVAT Credit on being pointed out by the Audit party, the appellant has shown their bonafide on admitting the error, penalty set aside - penalty not warranted - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of excess Cenvat credit on inputs
- Imposition of penalty under Rule 15 read with Section 11AC of the Act

Analysis:
1. Availment of excess Cenvat credit on inputs: The appellant, engaged in manufacturing pesticides, availed Cenvat credit on inputs, including phenol, based on dealer's invoice instead of the proportionate credit amount. The Department found an excess credit of ?4,17,764 on phenol and ?4,39,394 on other inputs. The excess credit was promptly reversed by the appellant upon detection, even before the issuance of the Show Cause Notice (SCN). The issue revolved around whether the appellant's actions constituted fraud or suppression. The appellant argued that the excess credit was a mistake and relied on a precedent case to support their claim. The Tribunal, considering the appellant's timely reversal of excess credit and absence of fraudulent intent, set aside the penalty imposed by the Commissioner (Appeals) and allowed the appeal.

2. Imposition of penalty under Rule 15 read with Section 11AC of the Act: The SCN issued proposed demands for the differential duty, interest, and penalty under Rule 15 read with Section 11AC of the Act. The appellant contested the penalty imposition, arguing that the excess credit availed was unintentional, and there was no fraudulent intent. The Tribunal, in line with the precedent decision in a similar case, emphasized that the appellant had rectified the error promptly upon detection, demonstrating good faith. Consequently, the Tribunal allowed the appeal and overturned the penalty imposed by the Commissioner (Appeals), reducing it from ?2,19,697 to ?50,000. The Tribunal's decision was based on the principle that the appellant's actions did not indicate malice or deliberate wrongdoing, warranting a lenient approach towards penalty imposition.

In conclusion, the Tribunal's judgment in the appeal against the Order-in-Appeal focused on the appellant's inadvertent availment of excess Cenvat credit on inputs, the timely reversal of the excess credit upon detection, and the absence of fraudulent intent. By citing a precedent case and considering the appellant's actions in good faith, the Tribunal set aside the penalty imposed by the Commissioner (Appeals) and allowed the appeal, providing consequential relief to the appellant.