2019 (10) TMI 886 - AT - Central Excise

Irregular availment and utilization of excess CENVAT credit - inputs - capital goods - typographical error - penalty u/s 11AC - HELD THAT - It is not the case of Revenue that despite being pointed out by the department about the short reversal of ₹ 50/- the Appellant failed to do the needful nor it is the case of Revenue that they raised this plea before the Adjudicating Authority at the time of hearing. It seems this issue was raised by Revenue before the learned Commissioner for the first time. Had the department raised this shortfall of ₹ 50/- earlier then the Appellant would have paid that amount then and there. It has been pointed out by the learned Chartered Accountant appearing for Revenue that the department in its audit report itself alleged the availment of excess credit amount to ₹ 4,38,389/- only and not the amount of ₹ 4,38,439/-. No reason has been mentioned by the Revenue for mentioning the lesser amount in its audit report. It is the mistake on account of incorrect calculation on the part of the department and Appellant cannot be penalised for it. The Appellant acted fairly and immediately upon being pointed out by the audit party, reversed the excess excess credit availed by them alongwith applicable interest. Imposition of penalty - HELD THAT - Proviso to Section 11AC(1)(a) , Central Excise Act, 1944 specifically provides that if the assessee pays the duty portion alongwith interest payable u/s. 11AA before the issuance of the show cause notice or within 30 days of issue of show cause notice, no penalty shall be payable by that assessee. In my view since the Appellants have already reversed the entire excess credit availed by them (as pointed out by the audit party) alongwith interest, much before the issuance of the show cause notice, in view of Section 11AC ibid no penalty is payable by them. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Irregular availing and utilization of Cenvat Credit
- Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 r/w Section 11AC of the Central Excise Act, 1944

Analysis:
1. Irregular availing and utilization of Cenvat Credit:
The Appellants were found to have irregularly availed and utilized excess Cenvat Credit on capital goods and inputs during the period 2012-13 to 2013-14. Upon audit scrutiny, it was discovered that the Appellants had availed an excess credit of ?4,38,439. Despite the Appellants realizing their mistake and reversing the credit with interest before the issuance of a show cause notice, a demand was made for the amount along with interest and penalty. The Adjudicating Authority confirmed the demand, leading to an appeal by the Revenue on the grounds of a shortfall in the reversal amount and the failure to examine penalty imposition under Section 11AC of the Act.

2. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004 r/w Section 11AC of the Central Excise Act, 1944:
The learned Commissioner allowed the Revenue's appeal and imposed a penalty equal to the excess credit availed by the Appellants. The penalty was based on the grounds of a ?50 shortfall in the reversal amount, leading to a 100% penalty on the total amount of ?4,38,439. However, the Appellants argued that there was no willful suppression or intention to evade payment of duty, and the reversal of the excess credit was done in good faith upon realization of the error. The Appellants contended that the penalty was unjustified as they had rectified the mistake promptly and that the Revenue had not raised the issue of the ?50 shortfall earlier. The Appellants had reversed the entire excess credit with interest before the show cause notice was issued, as per the provisions of Section 11AC(1)(a) of the Act, which states that no penalty shall be payable if duty and interest are paid before or within 30 days of the show cause notice.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, ruling that no penalty was payable by the Appellants as they had rectified the excess credit availed along with interest before the issuance of the show cause notice. The decision was based on the provisions of Section 11AC of the Central Excise Act, 1944, which exempts penalty payment if the duty and interest are paid before or within the specified period after the show cause notice.