2018 (10) TMI 157 - AT - Central Excise

CENVAT Credit against payment of Education Cess and Secondary & Higher Education Cess on counter veiling duty (CVD) - Held that - The case of the appellant in availing Education Cess and Secondary Cess and Higher Education Cess and viz-a-viz Cenvat credit can only be considered as bonafide mistake in not knowing the change of rule and the same cannot be treated as suppression of fact or mis-statement etc. as they have paid the entire duty demand amount by way of Cess which were no more leviable. It has been held that such conduct of appellant can never be treated as suppression of fact, willful misstatement of fraud or violation of statutory provision to invoke extended period and impose fiscal penalty on the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Reduction of penalty amount for availing ineligible credit against payment of Education Cess and Secondary & Higher Education Cess on counter veiling duty (CVD).

Detailed Analysis:
The appellant challenged the reduction of penalty amount to 50% from 100% of the duty amount awarded by the order-in-original for availing ineligible credit against payment of Education Cess and Secondary & Higher Education Cess on CVD. The appellant sought total waiver of the penalty amount. The appellant's contention was that they had paid Education Cess and Secondary and Higher Education Cess on CVD after 01.04.2012, which was no longer leviable from that date, and availed Cenvat credit in 2014-15. The appellant argued that the payment was auto-generated and captured in the system during the submission of bills of entry. The appellant, being a 100% export-oriented company, claimed that customs duty was leviable at a zero rate, refuting the department's allegation of intentionally availing Cenvat credit improperly.

In response to the submissions, the department fully supported the order of the Commissioner (Appeals) and reiterated the grounds of confirmation of the appeal. Upon perusing the case record, it was noted that the appellant consistently stated from the reply to the show cause that no Cenvat credit was availed by them in respect of education cess on basic custom duty since it was zero-rated. The duty demand was met in 2015 upon realizing the wrong availment of credit against payment of cess on CVD. The Show Cause Notice served in 2016 alleged suppression, but the appellant had reversed the Cenvat credit amount in 2015. The Commissioner (Appeals) reduced the penalty amount to 50% based on the transactions recorded in the Books of Accounts, considering the appellant's mistake as a bonafide error due to not knowing the change in rules.

The judgment allowed the appeal, setting aside the order passed by the Commissioner (Appeals) confirming the penalty amount. The court held that the appellant's conduct could not be construed as suppression of fact, willful misstatement, or fraud, as they had paid the entire duty demand amount by way of Cess, which was no longer leviable. Despite relying on various legal precedents, the court found no necessity to invoke an extended period or impose a fiscal penalty on the appellant.