2013 (7) TMI 530 - AT - Central Excise

Imposition of Penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 - Rule provides for imposition of penalty in cases where the assessee takes wrong Cenvat credit which shall be not exceeding the duty on the excisable goods in respect of which any contravention has been committed or Rs. 2,000/rupees, whichever is greater Held that - No malafide on the part of the assessee, who has immediately reversed the excess credit Penalty reduced to Rs. 25,000/-, but for reduction in the quantum of appeal, the appeal is otherwise rejected.

Summary

Issues:
1. Denial of credit of cess and higher education cess paid by the input supplier to a 100% export oriented unit.
2. Calculation error in availing Cenvat credit leading to a demand of duty.
3. Imposition of penalties under Rule 15(1) for wrong Cenvat credit availed.

Analysis:
1. The proceedings were initiated against the appellant for the denial of credit of cess and higher education cess paid by the input supplier, a 100% export oriented unit. The Revenue contended that the formula for calculating admissible credit did not include cess and higher education cess. However, the Commissioner dropped this ground, allowing the credit. The appellant made a calculation error by adopting a wrong value in the formula, leading to the demand of duty. The appellant admitted the mistake and corrected it by reversing the wrongly calculated credit.

2. The only challenge in the appeal was the imposition of penalties under Rule 15(1) amounting to Rs. 1,25,000. The rule allows penalties not exceeding the duty on the excisable goods or Rs. 2,000, whichever is greater. The appellant argued for a reduction in the penalty to Rs. 2,000 due to the absence of any malafide intent on their part, which was not alleged in the show cause notice.

3. The appellant's excess credit was a result of a miscalculation due to a change in the formula values from 400 to 200. The judgment acknowledged that this error might have been due to a lack of awareness of the changed formula. Rule 15(1) does not require mens-rea for imposing penalties for wrong credit availed. However, penalties under the rule are considered penal in nature and imply an element of malafide. The penalty can range between Rs. 2,000 and the maximum duty involved. Considering the lack of malafide on the appellant's part, immediate correction of the error, and self-reporting to the Adjudicating Authority, the penalty was reduced to Rs. 25,000. Despite the penalty reduction, the appeal was rejected.