2019 (6) TMI 320 - AT - Central Excise

CENVAT credit - inputs - capital goods - cenvat entries pertaining to capital goods were captured wrongly in the head of inputs registered in the system and appellant availed 100% credit in the first year itself - HELD THAT - It is made clear that the appellant was entitled to avail 50% of the credit in respect of various capital goods, in the first financial year when they received the capital goods. The balance 50% would be availed by them in the next financial year. All the debit/ credit entries made in respect of the credit are required to be allowed so as to neutralize the situation - As such the confirmation of demand in question in the above two appeals leading to denial of credit of duty paid on the capital goods is not justified. It is made clear that the appellant would get the credit of duty paid on the capital goods in accordance with law i.e. 50% in the first financial year and 50% in the subsequent financial year. Apart from that any excess credit availed is required to be reversed back and any excess debit made by them is required to be neutralized. Such exercise can be done by the Original Adjudicating Authority. Demand of Interest - HELD THAT - The credit, though availed, was not utilized by them and in terms of the Hon ble Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX LARGE TAXPAYER UNIT, BANGALORE VERSUS M/S BILL FORGE PVT LTD, BANGALORE 2011 (4) TMI 969 - KARNATAKA HIGH COURT the excess unutilized credit would not call for any confirmation against the appellant - demand set aside. Penalty - HELD THAT - The entire availment of credit by reversing the same in the books of accounts was the subject matter of communications between the appellant and their Jurisdictional Central Excise Authority. The appellant have also attributed the said inadvertent mistake to the newly introduced SAP system. As such, in the absence of any mala fide on the part of the appellant. Imposition of penalty upon them is not justified - penalty set aside. Appeal disposed off.

Summary

Issues:
1. Availment of Cenvat Credit in violation of prescribed procedure.
2. Initiation of proceedings for confirmation of duty, interest, and penalties.
3. Corrective measures taken by the appellant.
4. Confusion due to the introduction of SAP system.
5. Confirmation of demand and denial of credit on capital goods.
6. Confirmation of interest on unutilized credit.
7. Imposition of penalty for inadvertent mistake.

Analysis:

1. The appellants availed Cenvat Credit of duty paid on various inputs and capital goods but made a mistake by availing the entire credit in the first financial year instead of the prescribed 50% with the balance to be availed in the subsequent year.

2. Proceedings were initiated against the appellants for confirmation of duty, interest, and penalties due to the mistake in availing the credit, invoking the extended period of limitation. The impugned order confirmed the demand, interest, and penalties, leading to the present appeal.

3. The appellant acknowledged the mistake and took corrective measures by reversing the credit entry and debiting the amount in the appropriate records. They attributed the confusion to the introduction of the SAP system and rectified the errors in their books of account.

4. The confusion in availing the credit was linked to the introduction of the SAP system, which led to the incorrect capture of Cenvat entries related to capital goods under the head of inputs in the system.

5. The Tribunal clarified that the appellant was entitled to avail 50% of the credit for capital goods in the first financial year and the remaining 50% in the subsequent year. All debit and credit entries related to the credit needed to be allowed to neutralize the situation, ensuring the appellant received the credit as per the law.

6. Regarding the confirmation of interest on unutilized credit, the Tribunal referred to a judgment and set aside the confirmation, noting that excess unutilized credit would not warrant confirmation against the appellant.

7. The Tribunal found no mala fide intent on the part of the appellant in availing the credit incorrectly, attributing the mistake to the newly introduced SAP system. Consequently, the imposition of penalties was deemed unjustified, and the penalty was set aside based on the communication and actions taken by the appellant and the Central Excise Authority.

In conclusion, the appeal was disposed of by allowing the credit for capital goods as per the prescribed procedure, setting aside the confirmation of interest on unutilized credit, and revoking the penalty imposed due to the inadvertent mistake made by the appellant.