2018 (12) TMI 717 - AT - Central Excise

Demand of Interest and penalty - reversal of irregularly availed and utilized cenvat credit of education cess and secondary and higher education cess - Held that - The proposal of recovery of wrongly availed cenvat credit has no more significance as apparently and admittedly the credit has already been reversed. Demand of Interest - Held that - Interest set aside by the Commissioner Appeals himself. Nothing has been brought that Department has filed an Appeal challenging the same. Penalty - Held that - It is the apparent and admitted case that the wrongly availed cenvat credit on education cess was not utilized till the time Department conducted audit in the appellant s premises. Admittedly the said entire credit has been reversed even prior the issuance of impugned Show Cause Notice. It is also the apparent fact that the duty otherwise has been regularly paid by the appellant. These admissions makes it abundantly clear that there is no case of alleged intent to evade duty - The finding of the Commissioner that the Rules are clear and unambiguous is too insufficient to invoke the grave provision of imposing penalty - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of cenvat credit on education cess and secondary and higher education cess on bills of entry from a unit in SEZ
- Show Cause Notice for recovery of wrongly taken cenvat credit
- Confirmation of penalty by Commissioner Appeals
- Allegation of suppression of facts and imposition of penalty under Section 78 of the Act

Availment of Cenvat Credit on Education Cess:
The case involved the appellant, engaged in manufacturing cement clinker and cement, availing cenvat credit on education cess and secondary and higher education cess amounting to a specific sum on bills of entry from a unit in a SEZ. The Department conducted an audit and issued a Show Cause Notice for recovery of the wrongly taken cenvat credit, citing it as an import for the unit in the domestic tariff area, making the availment improper.

Show Cause Notice and Confirmation of Penalty:
The Commissioner Appeals set aside the demand for interest but confirmed the penalty, stating that the reversal of the wrongly availed cenvat credit was done only after the Department's audit. The penalty was upheld on the grounds that if there had been no audit, the wrongly availed credit could have been utilized, indicating suppression of facts. The appellant challenged this decision through the present appeal.

Analysis of the Judgement:
During the hearing, the appellant's advocate argued that the cenvat credit was never utilized and was reversed even before the Show Cause Notice was issued, negating any proposed recovery, interest, or penalty. The appellant contended that there was no intention to evade duty or suppress facts, and the penalty was wrongly confirmed. The Department's representative justified the decision, emphasizing that the appellant's action of taking credit of customs cess was a violation warranting the penalty.

The presiding member observed that the recovery of the cenvat credit was no longer relevant as it had already been reversed. The Commissioner Appeals' decision to set aside the interest was upheld, with no challenge from the Department. Regarding the penalty, it was noted that the credit was not utilized until the audit, and the duty had been regularly paid. The absence of intent to evade duty and the lack of evidence of fraud or misrepresentation led to the conclusion that the penalty imposition based solely on clear rules was insufficient. The judgement highlighted the necessity of proving fraud or misrepresentation for penalty imposition and concluded that the appellant acted in good faith by reversing the credit promptly. Consequently, the part of the order imposing penalty was set aside, and the appeal was allowed.

In conclusion, the judgement addressed the issues of cenvat credit availment, Show Cause Notice, penalty confirmation, and suppression of facts, ultimately ruling in favor of the appellant by setting aside the penalty imposition.