2018 (7) TMI 988 - AT - Central Excise

CENVAT credit of Basic Customs Duty, Customs Education Cess and Customs Secondary And Higher Education Cess - case of appellant is that they availed the cenvat credit under mis-interpretation of the provision however, under bonafide belief - applicability of Sub Section C of Section 11 AC of CEA or Sub Section A of 11AC of CEA? Held that - It is an apparent and admitted fact that the amount of CENVAT credit as is alleged by the Department to have been wrongly availed, was deposited by the appellant alongwith the interest much within the reasonable time of it being brought to the notice of the appellant and much before the issuance of the impugned Show Cause Notice. It is apparent that the said deposit was made almost 15 months prior the said Show Cause Notice. The only adjudication remains is as to whether the Commissioner (Appeals) has rightly invoked Sub Section C of Section 11 AC of CEA or the facts of the case takes the appellant to fall under Sub Section A of 11AC of CEA - Held that - The Sub Section C could have come into picture if and only if there had been some positive act observed by the Department, that too by way of cogent evidence to show that there was an element of mensrea of tax evasion available with the appellant while availing the impugned cenvat credit and even while utilizing the same - The findings of Commissioner (Appeals) merely relying upon the deposit by the appellant of the wrongly availed cenvat credit as an admission and a reason to not to search for the evidence qua the positive act of alleged fraud and mis-representation, is a finding based on the presumption and surmises. The same is therefore not sufficient to bring home the guilt of the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmation of penalty under Section 11 AC(c) of Central Excise Act, 1944.

Analysis:
The appellant, engaged in manufacturing nylon fabric, availed cenvat credit under Cenvat Credit Rules, 2004, which was alleged to be wrongly done. The appellant repaid the amount along with interest before the issuance of the Show Cause Notice. The Commissioner (Appeals) confirmed the demand and imposed a penalty under Section 11 AC(c), leading to the present Appeal.

The appellant argued that the cenvat credit was availed under a misinterpretation but with a bona fide belief. They contended that the Show Cause Notice was unnecessary as the amount was repaid promptly. The Department argued that the appellant's deposit was not voluntary but made after being pointed out by the audit team, indicating misrepresentation and suppression of facts.

The Tribunal observed that the appellant repaid the amount well before the Show Cause Notice was issued, as per the provision of Section 11AC. The Commissioner (Appeals) wrongly applied Sub Section C of Section 11AC, which requires evidence of fraud or misrepresentation. The Tribunal cited legal precedents emphasizing the need for clear evidence of intent to evade duty. The findings of the Commissioner (Appeals) were deemed insufficient and based on presumption.

The Tribunal rejected the Department's reliance on past judgments, stating they were not applicable post-amendment in Section 11AC(a) of CEA, 1944. The Tribunal upheld the original Adjudicating Authority's decision and set aside the Commissioner (Appeals) order, allowing the Appeal.

In conclusion, the Tribunal found in favor of the appellant, emphasizing the importance of clear evidence of fraudulent intent for imposing penalties under Section 11AC.