2018 (5) TMI 204 - AT - Central Excise

Extended period of limitation - excess CENVAT credit availed - Interest - penalty - Held that - Department came to know about discrepancy in Cenvat credit only after being informed about the same by the appellant on 17.11.2011. In the SCN, the extended period has expressly not been invoked though there is mention that the assessee has utilized the excess Cenvat credit intentionally. Interest - Held that - Once it is held by the adjudicating authority that section 11AC is not applicable and the elements for applying extended period for the demand are similar, the demand of interest itself becomes time barred - the show cause notice for demand of interest is clearly barred by limitation - demand of interest set aside. Penalty under Rule 15 (1) of Cenvat Credit Rules, 2004 - Held that - The plea of the appellant is that they had not taken excess Cenvat credit whereas the department has alleged that they had taken excess Cenvat credit and hence they had violated Rule 15 (1) of Cenvat Credit Rules, 2004. Since there is no finding on this aspect at all, the matter is remanded back to the Commissioner to examine this aspect. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Recovery of interest and penalty under Rule 15 (1) of Cenvat Credit Rules, 2004.
2. Time limitation for raising the demand of interest.
3. Applicability of Section 11AC and extended period for demand.
4. Penalty under Rule 15 (1) of Cenvat Credit Rules, 2004.

Analysis:
1. The appellant, registered for manufacturing computer assembly, was found to have taken excess Cenvat credit, leading to a show cause notice for interest recovery and penalty imposition. The appellant voluntarily debited the excess amount but did not pay interest. The adjudicating authority confirmed the interest demand and imposed a penalty of ?50,000. The appellant challenged this decision in appeal.

2. The appellant argued that the demand was time-barred as the elements of Section 11AC were non-existent, making the demand jurisdictionally flawed. They claimed the excess credit was due to errors during the transition from Tally Software to ERP Software. Citing relevant case laws, the appellant contended that the penalty under Rule 15 (1) was not applicable due to limitation in the show cause notice.

3. The Revenue contended that the show cause notice was within time as the discrepancy was noticed in 2011 and the notice was issued in 2012. They referred to a Board Circular and a Supreme Court decision to support their position. The adjudicating authority found that the appellant did not utilize the excess credit wrongly, thus Section 11AC was deemed inapplicable. The demand of interest was held to be time-barred due to the absence of extended period invocation.

4. The Tribunal held that since Section 11AC was not applicable and the elements for extended period demand were similar, the interest demand was time-barred. The plea that the notice was issued in time was rejected, citing the relevant date as the filing of returns. The matter was remanded for a clear finding on the penalty issue under Rule 15 (1) of Cenvat Credit Rules, 2004, as no determination was made on whether excess credit was taken or if there were errors in return figures.

5. Ultimately, the demand of interest was set aside, and the issue of penalty was remanded for further adjudication by the Commissioner. The appellant was granted the opportunity to defend their case fairly in the new proceedings. The appeal was disposed of accordingly.