2018 (5) TMI 1298 - AT - Central Excise

Liability of Interest u/s 11AB of the Central Excise Act, 1944 - Penalty u/r 15(3) of CCR 2004 read with Rule 25 of CER 2002 - appellant have wrongly availed cenvat credit twice on the same invoice in the month of April 2007 - Held that - as per Rule 14, the wordings are if the credit has wrongly been taken or utilize the interest is chargeable therefore even though the credit was not utilized only on cenvat taken, the interest is chargeable - Hon ble Supreme Court in the case of Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - SUPREME COURT interpreting Rule 14 held that interest is chargeable from the date of taking credit - the appellant is liable to pay the interest on wrongly availed credit from the date of taking credit till the reversal thereof. Penalty - Held that - the appellant has no malafide intention. The wrong credit availment twice on the same invoice is due to inadvertence. This cannot be taken as intention to evade duty - More over the appellant is a Public Sector Undertaking and paying the huge revenue therefore it cannot be expected from the appellant that they had any malafide intention to avail wrong credit - penalty not warranted. Appeal allowed in part.

Summary

Issues:
1. Charging of interest under Section 11AB of the Central Excise Act, 1944.
2. Penalty under Rule 15(3) of Cenvat Credit Rules, 2004 read with Rule 25 of Central Excise Rules, 2002.

Analysis:

Issue 1: Charging of Interest
The appellant wrongly availed cenvat credit twice on the same invoice, which was noticed by audit officers. The appellant paid the wrong credit amount but did not discharge the interest liability. The question was whether interest under Section 11AB of the Central Excise Act was applicable. The appellant argued that since the credit was not utilized and was maintained in the balance, no interest should be charged. However, the tribunal held that as per Rule 14, interest is chargeable from the date of taking credit, even if not utilized. Citing the case law of Ind-Swift Laboratories Ltd., the tribunal concluded that interest was legally chargeable on the wrongly availed credit.

Issue 2: Penalty Imposition
The tribunal considered the penalty imposed under Rule 15(3) of Cenvat Credit Rules, 2004 read with Rule 25 of Central Excise Rules, 2002. The appellant contended that there was no malafide intention, and the error was due to inadvertence, not an attempt to evade duty. Additionally, being a Public Sector Undertaking and a significant revenue contributor, the appellant's lack of malafide intent was highlighted. Relying on this, the tribunal set aside the penalty, stating that the appellant's actions did not warrant its imposition. Therefore, the penalty was deemed unjustified, and the appeal was partly allowed in favor of the appellant.

In conclusion, the tribunal upheld the charging of interest under Section 11AB of the Central Excise Act, 1944, but set aside the penalty imposed under Rule 15(3) of Cenvat Credit Rules, 2004 read with Rule 25 of Central Excise Rules, 2002. The judgment was pronounced on 17/05/2018 by the tribunal.