2018 (11) TMI 1379 - AT - Central Excise

Demand of interest and penalty - the appellant had reversed the amount of cenvat credit of ₹ 1,02,678/- before issuance of the show cause notice - Held that - Since sufficient balance was always lying in their cenvat account since the date of credit taken till the reversal of the same, the payment of interest is waived. Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Held that - The Hon ble High Court at Allahabad in the case of Commr. Of Cus. & C.Ex., Noida vs. Supreme Industries Ltd. 2016 (11) TMI 1289 - ALLAHABAD HIGH COURT has held that neither any penalty nor interest under Section 11AC and under Section 11AB respectively was payable by assessee when it has deposited disputed duty voluntarily before issuing of notice under Sections 11AC and 11AB. The imposition of penalty under 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 is set aside - payment of interest is also waived - appeal allowed in part.

Summary

Issues:
Payment of interest and imposition of penalty in a Central Excise case involving reversal of cenvat credit before the issuance of a show cause notice.

Analysis:
The appellant, engaged in Glass & Glassware manufacturing, cleared old capital goods without paying Central Excise duty. The adjudicating authority confirmed a demand of ?1,02,678 under Rule 14 of Cenvat Credit Rules 2004. However, interest payment was waived due to sufficient balance in the account. A penalty of ?1,02,678 was imposed under Rule 15(2) of the Cenvat Credit Rules, 2004. The Commissioner upheld the duty confirmation and penalty imposition, ordering interest recovery. The appellant contested the interest and penalty, citing the reversal of cenvat credit before the show cause notice, relying on a High Court decision.

The appellant argued that since they reversed the cenvat credit before the show cause notice, interest and penalty should not apply. The Tribunal referred to a High Court decision stating that if disputed duty is paid before a show cause notice proposing penalty and interest, it indicates no fraud or suppression, justifying no penalty or interest. Following this, the penalty was set aside, but interest payment was upheld due to the balance in the account. The appellant's appeal was allowed with consequential relief.

In conclusion, the Tribunal set aside the penalty under Cenvat Credit Rules but upheld the interest payment decision. The High Court decision influenced the judgment, emphasizing that payment of disputed duty before a show cause notice negates the need for penalty or interest. The appellant's appeal was successful, providing relief in this Central Excise case.