2019 (8) TMI 1099 - AT - Central Excise

Imposition of penalty - CENVAT Credit - Rule 15 (2) of CCR 2004 - HELD THAT - There is no dispute as to the fact that the appellant had availed the CENVAT Credit on the duty paid on capital goods and also claimed depreciation from the income tax authorities, however, he filed revised income tax returns with the authorities, writing back the depreciation claimed - this would amount to non availment of depreciation as per and in accordance of provisions of CENVAT Credit 2004. The adjudicating authority has taken a conscious note of this and dropped the demand alongwith interest, recording so, very clearly. If that be the case, the question of imposition of any penalty on the appellant does not arise as provisions of Rule 15 (2) of CENVAT Credit Rules 2004 pre- supposes the demand of duty or irregular availment of CENVAT Credit. In the absence of any confirmation of demand, penalty imposed by the lower authorities cannot withstand the scrutiny of law - the appeal is allowed holding that penalty is set aside.

Summary

Issues: Challenge of penalty imposed on appellant assessee for availing CENVAT Credit and claiming depreciation on central excise duty.

In this judgment by the Appellate Tribunal CESTAT HYDERABAD, the appeal was directed against Order-in-Appeal No. GUN-EXCUS-000-APP-146-17-18, dated 26.12.2017. Despite the absence of representation from the appellant assessee, the matter was taken up for disposal due to its narrow compass. The issue revolved around the challenge of the penalty imposed by the adjudicating authority and upheld by the first appellate authority. The appellant had availed CENVAT Credit of Central Excise duty on capital goods during 2012-13, claimed depreciation on the duty amount, and filed returns with the income tax authorities reflecting this. Following an audit, the appellant corresponded with the Department, stating they revised income tax returns to write back the depreciation. A show cause notice was issued, seeking interest and proposing a penalty. The adjudicating authority dropped the demands for duty reversal and interest, but imposed an equivalent penalty under Rule 15(2) of CENVAT Credit Rules 2004 read with Section 11 AC of Central Excise Act, 1944. The first appellate authority upheld this decision, leading to the current appeal.

The Learned Departmental Representative argued that the penalty was justified as the appellant had availed CENVAT Credit and claimed depreciation, only writing it back after audit. However, the tribunal found that the appellant had indeed revised income tax returns to write back the depreciation, effectively nullifying the irregular availment of depreciation as per CENVAT Credit 2004 provisions. Since the adjudicating authority had already dropped the demand and interest, the tribunal concluded that the penalty imposition was unwarranted. As per Rule 15(2) of CENVAT Credit Rules 2004, penalty presupposes a demand or irregular availment of credit, which was not confirmed in this case. Therefore, the tribunal set aside the impugned order and allowed the appeal, holding that the penalty should be overturned.