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2018 (7) TMI 1369 - HC - Central ExciseDemand of Interest and penalty - CENVAT Credit reversed with respect to Basic Customs Duty and Cess on Textiles which was not admissible to it - Held that - The controversy involved in this appeal is squarely covered by the decision of the co-ordinate Bench of this Court in the case of Commissioner of Central Excise & Sales Tax, LTU, Bangalore Vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT , where it was held that Once the entry was reversed, it is as if that the Cenvat credit was not available. The imposition of penalty and interest in the present case has been set aside by the learned Tribunal essentially on the ground that soon upon the mistake being pointed out by the Officer of the Department, the Respondent Assessee immediately reversed the Cenvat Credit wrongly availed by it in respect of the Basic Customs Duty (BCD) and Cess on Textiles - there cannot be said to be any mis-statement, fraud or collusion on the part of the Respondent Assessee through which it wanted to evade the Excise Duty in question - the setting aside of the interest and penalty in these circumstances cannot be faulted. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Whether the reversal of CENVAT credit before its utilization exempts the assessee from paying interest and penalty. 2. Whether there was suppression of facts or intent to evade duty by the assessee. 3. Applicability of Section 11AC and relevant case laws to the imposition of penalty and interest. Detailed Analysis: 1. Reversal of CENVAT Credit Before Utilization: The Tribunal found that the Respondent Assessee had reversed the CENVAT Credit entry related to Basic Customs Duty (BCD) and Cess on Textiles immediately upon being informed by the Revenue officials. The Tribunal relied on the precedent set by the Karnataka High Court in Commissioner of Central Excise & Sales Tax, LTU, Bangalore Vs. Bill Forge Pvt. Ltd., which states that if the CENVAT credit is reversed before utilization, it amounts to not taking the credit. Consequently, the Tribunal ruled that the Respondent Assessee was not liable to pay interest or penalty as the credit was reversed before its utilization. 2. Suppression of Facts or Intent to Evade Duty: The Tribunal and the High Court both concluded that there was no evidence of suppression of facts, fraud, or collusion by the Respondent Assessee. The Tribunal noted that the credit was taken inadvertently by an officer of the firm without the appellant's knowledge. Upon being informed, the appellant immediately reversed the credit. The High Court concurred, stating that the immediate reversal of the wrong CENVAT credit upon being pointed out indicated no intent to evade duty. Therefore, the imposition of penalty under Section 11AC was not justified. 3. Applicability of Section 11AC and Relevant Case Laws: The Tribunal and the High Court examined several case laws, including JK Tyre & Industries Ltd. Vs. ACCE and Union of India Vs. Dharamendra Textile Processors. The Tribunal concluded that the issue was no longer res integra, citing the decision in Bill Forge Pvt. Ltd., which clarified that interest is compensatory and is only applicable when duty is not paid on the due date. Since the Respondent Assessee reversed the credit before its utilization, the interest was not applicable. The High Court also noted that the judgments cited by the Revenue were distinguishable on facts and did not support the imposition of penalty and interest in this case. Conclusion: The High Court dismissed the Revenue's appeal, stating that no substantial question of law arose. The reversal of CENVAT credit before its utilization exempted the Respondent Assessee from paying interest and penalty. The immediate reversal of the credit indicated no intent to evade duty, and the imposition of penalty under Section 11AC was not justified. The appeal was dismissed with no costs.
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