2018 (7) TMI 323 - AT - Central Excise

Penalty u/r 15(2) of the CENVAT Credit Rules - When pointed out, the appellant had reversed the credit along with interest even before the show cause notice was issued to them - suppression of facts or not - Held that - Penalty is imposable not just when input credit is taken or utilised wrongly but it is imposable when such taking or utilising the CENVAT credit is by reason of (a) fraud, or (b) collusion, or (c) any wilful mis-statement, or (d) suppression of facts, or (e) contravention of any provisions of the Act or Rules with an intent to evade payment of duty. Other cases of wrong availment of CENVAT credit are covered by Rule 15(1) of CENVAT Credit Rules, 2004. It is not in dispute that the credit has been taken wrongly by the appellant. Now the other elements required to fasten the penalty are not evident from the show cause notice - It is a well settled position that suppression of facts must be a positive act. In this case the assessee is not required to show individual items on which he has taken credit in his ER-1s. When something was not required to be declared, he could not have been expected to declare it. This cannot be called a suppression of the fact because there was nothing required to be declared - The other elements such as fraud, collusion, wilful mis-statement are not alleged in the show cause notice. There is no case to impose penalty under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC of the Act - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of CENVAT Credit on ineligible items
- Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC of the Central Excise Act

Analysis:

Issue 1: Availment of CENVAT Credit on ineligible items
The appellant, a manufacturer of Silico Manganese, availed CENVAT Credit of ?5,34,934 on items like mill plates, MS beams, MS angles, channels, TMT bars, MS pipes, and bars for manufacturing capital goods. The department alleged that this credit was not entitled, and before the show cause notice, the appellant paid the duties and interest. The main contention was whether the appellant suppressed information by not reflecting these items in statutory returns. The appellant argued that since ER-1 returns do not require showing individual items for CENVAT Credit, there was no suppression of facts. The tribunal noted that suppression must be a positive act, and in this case, the appellant was not required to declare individual items in ER-1s. As the intention to evade payment of duty was not evident, the tribunal concluded that there was no suppression of facts.

Issue 2: Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC
The department imposed a penalty of ?5,34,934 under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC. The appellant contended that since they had already paid the wrongly availed credit along with interest before the show cause notice, no penalty should be imposed. The tribunal observed that penalty under Rule 15(2) is applicable when credit is taken wrongly due to fraud, collusion, misstatement, suppression of facts, or contravention with intent to evade duty. As the intention to evade duty was not proved, and the appellant had reversed the credit before the notice, the tribunal found no grounds for imposing the penalty. The tribunal set aside the Order-in-Appeal and allowed the appeal.

In conclusion, the tribunal found that there was no suppression of facts or intent to evade duty, leading to the setting aside of the penalty imposed under Rule 15(2) of the CENVAT Credit Rules r/w Sec.11 AC of the Central Excise Act.