2018 (11) TMI 1288 - HC - Central Excise

Penalty u/s 11 AC - excess credit taken - the entire amount of credit was reversed and interest thereon paid before issuance of notice to show cause - Held that - The Authorities have come to a finding of fact that the error claimed to be an inadvertent error on the part of the appellant is actually not so. This finding of fact cannot be said to be a perverse. Moreover, the contention on behalf of the appellant that Section 11A(1) (b) of the Act would be applicable in the facts of this case, is not acceptable for the reason that Section 11A(1)(b) of the Act would not apply where short payment of duty has been on account of fraud, collusion, misstatement with mala fide intention so as to evade the duty. The view taken by the Tribunal on facts is a possible view and, therefore, cannot be found fault with - appeal dismissed.

Summary

Issues:
Challenge to penalty imposed under Section 11AC of the Central Excise Act for wrong availment of credit of duty.

Analysis:
The appellant challenged the order of the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal) under Section 35G of the Central Excise Act, 1944. The appellant raised questions regarding the correctness of upholding the penalty and justification for imposing the penalty. The Tribunal upheld the penalty under Section 11AC of the Act, stating that the excess credit was taken deliberately with malafide intent, even though the appellant had reversed the entire amount of credit and paid interest before the issuance of the show-cause notice. The Tribunal found that the mistake in taking excess credit for a large number of invoices could not be considered inadvertent, leading to the conclusion of malafide intention on the part of the appellant.

The appellant argued that the duty and interest were paid before the service of notice, invoking Section 11A(1)(b) of the Act, which, according to the appellant, should prevent the imposition of any penalty. However, the court found that the authorities' determination that the error was not inadvertent was a valid finding of fact. The court also noted that Section 11A(1)(b) would not apply in cases involving fraud, collusion, misstatement, or mala fide intention to evade duty. Therefore, the Tribunal's decision was deemed reasonable, and the appeal was dismissed without any costs being awarded.

In conclusion, the High Court upheld the Tribunal's decision to impose the penalty under Section 11AC of the Central Excise Act, ruling that the appellant's actions demonstrated malafide intent in taking excess credit. The court rejected the appellant's argument invoking Section 11A(1)(b) as inapplicable in cases involving fraud or mala fide intention to evade duty. The court found no fault with the Tribunal's decision and dismissed the appeal accordingly.