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2019 (5) TMI 1012 - AT - Central Excise100% EOU - wrongful availment of Cenvat credit on capital goods - imposition of penalty under Rule 13(2) and Rule 15(2) of Cenvat Credit Rules, 2002/2004 - Difference of opinion - Majority Order. HELD THAT - It is fact on record that the appellant has availed excess credit in terms of formula given in Rule 3(7) (a) of Cenvat Credit Rules, 2004, therefore it is mistake of calculation of availment of Cenvat credit which the appellant has reversed the credit on pointing out by the Department. In that circumstance, the penalty is not imposable on the appellant in the facts and circumstances of the case - the view entertained by the Hon ble Member (Judicial) is agreed upon. The Registry is directed to place matter before the Referral Bench for further proceedings.
Issues Involved:
1. Wrong availment of Cenvat credit on capital goods. 2. Imposition of penalty under Rule 13(2) and Rule 15(2) of Cenvat Credit Rules, 2002/2004. 3. Suppression of facts with intent to evade duty. 4. Validity of show cause notice issued after three years. 5. Reversal of excess credit and its impact on penalty. Detailed Analysis: 1. Wrong Availment of Cenvat Credit on Capital Goods: The appellant, a manufacturer of plastic bottles, was found to have availed excess Cenvat credit on capital goods received from a 100% EOU during the periods 2003-04 and 2004-05. The Range Officer observed that the credit was not availed in accordance with the formula provided in Rule 3(6)(a) of the erstwhile Cenvat Credit Rules, 2002, and Rule 3(7)(a) of the Cenvat Credit Rules, 2004. Consequently, a demand of ?56,33,653/- was confirmed along with interest, and a penalty of an equivalent amount was imposed. 2. Imposition of Penalty Under Rule 13(2) and Rule 15(2) of Cenvat Credit Rules, 2002/2004: The appellant contested only the penalty, not the demand or interest. They argued that the wrong computation of Cenvat credit was not due to any fraudulent intent or suppression of facts. The adjudicating authority, however, upheld the penalty, noting that the appellant had availed irregular credit and that the reversal of excess credit was done only after the department initiated verification. 3. Suppression of Facts with Intent to Evade Duty: The appellant argued that there was no suppression of facts with intent to evade duty, as the credit was not taken on ineligible goods. However, the adjudicating authority found that the appellant became aware of the department's investigation through a letter dated 18.02.2005 and only then reversed the excess credit. The authority concluded that there was suppression of facts, as the appellant did not voluntarily disclose the excess credit until after the department's inquiry. 4. Validity of Show Cause Notice Issued After Three Years: The appellant contended that the show cause notice was issued after an unreasonable delay of three years, making it invalid. They cited several case laws in support of this argument. However, the adjudicating authority found that the show cause notice was issued within the permissible period of five years from the date of knowledge of the department, as per the Supreme Court's judgment in the case of Mehta & Co. (2011). 5. Reversal of Excess Credit and Its Impact on Penalty: The appellant argued that they had reversed the entire excess credit before the issuance of the show cause notice and were willing to pay the interest, thus the penalty should not be imposed. However, the adjudicating authority noted that the reversal was not voluntary but prompted by the department's verification process. Therefore, the penalty was deemed justified. Separate Judgments: Majority Judgment: The majority, including the Technical Member and the third Member, upheld the penalty, emphasizing that the appellant's actions constituted suppression of facts with intent to evade duty. They found that the penalty was correctly imposed as the appellant only reversed the excess credit after the department's inquiry, indicating a lack of voluntary compliance. Dissenting Judgment: The Judicial Member dissented, arguing that the wrong computation of Cenvat credit was a genuine mistake without any malafide intention. She noted that the appellant had themselves brought the excess credit to the department's notice and reversed it before the issuance of the show cause notice. She held that the penalty was not warranted in the absence of any fraudulent intent or suppression of facts. Final Outcome: In view of the majority decision, the penalty was set aside, and the appeal was allowed to that extent.
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