2018 (5) TMI 1209 - HC - Central Excise

Re-credit of CENVAT amount - Whether the action of the assessee in taking re-credit of CENVAT amount after the Revenue had already rejected his claim can be termed as a fraudulent or other illegal activity done with an intention of defrauding the Government Officials? - Held that - The assessee has not taken the re-credit of its own but the same was done on the basis of its Auditor s objection. It amounted to an account entry reversal without there being any revenue impact as the issue concerning Cenvat credit on the amount of 49, 62, 640/- is already under adjudication pursuant to the first show cause notice. There appears no mala fide or fraudulent act on the part of the assessee more so when the first proceedings are pending - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Disallowance of Cenvat Credit and taking re-credit after rejection by Revenue.
2. Imposition of penalty for availing Cenvat Credit wrongly.
3. Liability for interest under Rule 14 of the Rules, 2004.
4. Appeal against the Tribunal's order setting aside penalty.

Analysis:
1. The appeal by the Revenue questioned the assessee's action of taking re-credit of CENVAT amount after it was rejected by the Revenue, raising concerns about fraudulent activities. The Tribunal set aside the penalty but upheld the disallowance of Cenvat Credit. The Commissioner held that credit for electricity wheeled out and not used within the factory is not eligible, requiring reversal as per the Rules, 2004. The Tribunal noted that interest liability could arise if there was insufficient balance in the Cenvat account, to be determined by the original authority.

2. The imposition of penalty was based on the assessee's initial wrongful availing of Cenvat Credit, subsequent reversal, and re-availing during pending proceedings. The Tribunal set aside the penalty, emphasizing the lack of fraudulent intent by the assessee, especially with the first proceedings pending. The Court noted that the re-credit was based on the Auditor's objection, without revenue impact, and no evidence of mala fide actions.

3. The liability for interest under Rule 14 of the Rules, 2004, was considered in the context of the disallowed Cenvat Credit. The Tribunal highlighted that interest liability would depend on the balance in the Cenvat account between re-credit and reversal dates, to be verified by the original authority. The Court emphasized the need for factual verification in determining interest liability.

4. The Court addressed the question of law regarding the assessee's re-credit action, ruling against the Revenue. The Court found no fraudulent or illegal activity by the assessee, especially with the first proceedings pending. Both appeals were dismissed, with parties bearing their own costs. The Court's decision focused on the lack of fraudulent intent and the pending nature of the initial proceedings in the case.