2018 (10) TMI 150 - AT - Central Excise

Penalty u/r 15 (2) of CCR, 2004, read with Section 11AC of the CEA, 1944 - Irregular availment of credit on inputs and capital goods - availment of credit disputed on the ground that at the time of taking such credit, the godowns where such goods received, were not registered with the Central Excise department - Held that - Since the appellant suo moto reversed the credit and also paid interest during the course of audit by the Central Excise department, it cannot be said that availment of Cenvat Credit was owing to the reason of fraud, collusion, suppression, etc. Since the statute clearly mandates imposition of penalties, in the eventuality, where there is involvement of fraud, collusion, etc., which admittedly was absent in this case, the imposition of penalty by the authorities below cannot be sustained in the eyes of law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Rule 15 (2) of Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944.

Analysis:
The appellant, engaged in the manufacture of Compressed Natural Gas (CNG), availed Cenvat Credit on capital goods during a disputed period. The department disputed this credit, claiming that the godowns where the goods were received were not registered with the Central Excise department at the time of availing the credit. Upon audit findings, the appellant voluntarily reversed the credit and paid interest before the issuance of the show-cause notice. The department then initiated proceedings seeking denial of credit, interest payment, and imposition of penalty. The adjudicated order confirmed a Cenvat demand against the appellant, along with interest and an equal amount of penalty under Rule 15 (2) of the Rules read with Section 11AC of the Act.

The appellant argued that availing the credit was in compliance with the Cenvat statute as there was no specific requirement to obtain registration before availing credit. They contended that there was no element of fraud, collusion, or willful misstatement in availing the credit, as the reversal and interest payment were done voluntarily upon the audit objection. The appellant challenged the imposition of penalty, claiming it was unjustified.

After considering both sides and examining the case records, the Tribunal found that the appellant had availed credit upon receiving duty paid goods in the godown, and obtaining registration at the initial plant setup was not a prerequisite for availing Cenvat benefit. Since the appellant voluntarily reversed the credit and paid interest upon audit discovery, and there was no evidence of fraud or collusion, the Tribunal concluded that the penalty imposed was not justified under the law. Therefore, the penalty imposed in the impugned order was set aside, and the appeal filed by the appellant was allowed with consequential benefits as per law.