2018 (5) TMI 1458 - AT - Central Excise

Demand of penalty u/s 11AC of CEA - CENVAT credit availed wrongly - reversed on being pointed out - Held that - In a similar matter where the assessee had wrongly availed the Cenvat Credit but immediately reversed it after pointing the mistake by the Revenue, this Tribunal in the matter of Commissioner of C. Ex, Allahabad Vs. Balrampur Chini Mills Ltd. 2013 (7) TMI 567 - CESTAT NEW DELHI has held that The show cause notice does not attribute any malafide intention to the appellant so as to invoke the penal provisions of Section 11AC. Also, there has to be element supported by evidence to invoke the provisions of Section 11 AC, penalty not warranted. In the present case the appellant had filed ER-1 return for the period in question. The appellant had clearly declared everything in their ER-1 Returns. The Show cause notice also does not attribute any malafied on the part of the appellant. Therefore, there is no fraud or mis-statement or suppressions or malafied on the part of the appellant and for the same reason no penalty is liable to be imposed on the appellant under Section 11 AC of the Act. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Incorrect availing of Cenvat Credit on packing material used in manufacturing exempted goods.
2. Demand for recovery of wrongly availed Cenvat Credit and interest.
3. Imposition of penalty under Cenvat Credit Rules, 2004.

Analysis:
1. The appellant was engaged in manufacturing goods falling under different tariff headings with varying duty rates. They had mistakenly availed Cenvat Credit on packing material used in manufacturing exempted goods. The audit team identified this error, leading to the appellant voluntarily depositing the amount along with interest.

2. The Department issued a Show Cause Notice demanding recovery of the availed Cenvat Credit, interest, and imposing a penalty. The Joint Commissioner confirmed the demand and ordered the recovery of the availed credit and interest, along with imposing a penalty under the Cenvat Credit Rules, 2004.

3. During the appeal, the appellant did not contest the demand and interest but challenged the imposition of the penalty. The appellant argued that there was no fraudulent intent as they promptly rectified the error upon notification. The appellant's compliance with filing ER-1 Returns and immediate reversal of the credit upon detection were highlighted to support their case against penalty imposition.

4. The Appellate Tribunal referred to precedents where penalties were not imposed when the assessee rectified the mistake promptly after detection, emphasizing the absence of fraudulent intent. The Tribunal noted that the Show Cause Notice did not attribute malafide intentions to the appellant, leading to the conclusion that no penalty should be imposed under Section 11 AC of the Act.

5. Considering the appellant's timely rectification, declaration in ER-1 Returns, and lack of fraudulent intent, the Tribunal allowed the appeal, ruling in favor of the appellant. The duty and interest were confirmed, but no penalty was imposed due to the absence of malafide actions.