2018 (10) TMI 1536 - AT - Central Excise

Penalty - irregular availment of credit - reversal with interest on being pointed out - extended period of limitation - Held that - The appellants have availed the CENVAT credit wrongly but the same was reversed along with interest after being pointed out by the audit party - Once the appellant has reversed the credit along with interest before the issuance of show-cause notice, then as per Section 11A(2), the Department should not have issued the show-cause notice. Further, Department has not brought any material on record to show that there was suppression of fact with intent to evade duty. Penalty not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Wrong availment of CENVAT credit by the appellant.
2. Rejection of appeal by the Commissioner (A).
3. Imposition of penalty under Rule 15(2) of CENVAT Credit Rules, 2004.
4. Invocation of extended period of limitation on the ground of suppression.
5. Applicability of Section 11A(2) of Central Excise Act, 1944.
6. Legal precedents and statutory provisions supporting the appellant's case.

Issue 1: Wrong Availment of CENVAT Credit
The appellant, engaged in sugar and molasses manufacturing, availed CENVAT credit wrongly on various items. The audit officers identified the irregularities, and the appellant reversed the credits with interest. Despite this, a show-cause notice was issued proposing recovery and penalties. The original authority confirmed the demand, leading to the appeal.

Issue 2: Rejection of Appeal
The Commissioner (A) rejected the appellant's appeal, prompting the case to be brought before the Tribunal. The appellant argued that the impugned order contradicted legal precedents and statutory provisions. They contended that once the irregularities were rectified post-audit, the show-cause notice should not have been issued.

Issue 3: Imposition of Penalty
The original authority imposed penalties under Rule 15(2) of CENVAT Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944. The appellant challenged this penalty, citing compliance post-audit and the absence of suppression of facts.

Issue 4: Invocation of Extended Period of Limitation
The department invoked the extended period of limitation on the grounds of suppression. However, the appellant argued that there was no suppression as the irregularities were disclosed in their monthly returns, supported by legal precedents and circulars.

Issue 5: Applicability of Section 11A(2)
The appellant relied on Section 11A(2) of the Central Excise Act, 1944, to argue that the show-cause notice should not have been issued once the irregular credits were rectified post-audit. They emphasized that there was no intent to evade duty.

Issue 6: Legal Precedents and Statutory Provisions
The appellant presented legal precedents and circulars to support their case, highlighting instances where compliance post-irregularity rectification led to the conclusion of proceedings. The Tribunal, after considering submissions and evidence, found in favor of the appellant, setting aside the penalty and allowing the appeal.

This comprehensive analysis of the judgment highlights the issues involved, the arguments presented by both parties, the legal provisions invoked, and the final decision of the Tribunal in favor of the appellant.