2015 (11) TMI 765 - AT - Central Excise

Benefit of CENVAT credit -credit earned in the subsequent months cannot be used for payment of duty for the previous month - Held that - Appellants have been utilizing excess credit for a period spread from June 2007 to April 2008 and such mis-utilization was for a number of months during the said period. As such, the appellant s plea that such wrong utilization had occurred on account of the accountant being new cannot be appreciated. However, I also find force in the appellant s contention that they do not gain anything by such early utilization of the credit inasmuch as the credit, as utilized would, not be available to them in the next subsequent month. Such wrong utilization invites confirmation of interest which is also required to be considered as penal in nature. However, admittedly, there has been contravention of law by the appellant repeatedly which in my view would invite some penal action against them. As such extending the benefit of doubt and after taking note of the fact that they were having sufficient balance in their PLA during the months of default and keeping in mind that appellant has already paid interest to the extent of ₹ 7,176/-, I impose a penalty of ₹ 10,000 - no reasons to confirm the demand. - Decided partly in favour of assessee.

Summary

Issues:
1. Mis-utilization of CENVAT credit for payment of duty.
2. Imposition of penalty under Rule 15 of CENVAT Credit Rule read with Section 11AC of the Excise Act.

Detailed Analysis:
1. The appellant, engaged in manufacturing pig iron, mis-utilized CENVAT credit for payment of duty from June 2007 to April 2008. The total mis-utilization amounted to Rs. 6,49,994. The original adjudicating authority confirmed the demand, interest, and imposed a 100% penalty. The appellant argued that the mis-utilization was unintentional due to a new accountant clerk's lack of awareness of the rules. The appellant contended that they had sufficient balance in their PLA and had paid interest of Rs. 7,176. The appellant sought relief from the penalty citing previous Tribunal decisions supporting their case.

2. The learned DR argued that the mis-utilization occurred over a year, indicating a pattern rather than a one-time mistake. The appellant's plea of the new clerk's ignorance was contested, stating that repeated mis-utilization warranted penal provisions. The learned DR requested upholding the original order.

3. The judicial member acknowledged the appellant's mis-utilization over several months and rejected the excuse of the new accountant clerk's ignorance. However, considering that the mis-utilized credit would not be available in subsequent months, the member found merit in the appellant's argument that no benefit was gained from early utilization. Despite the contravention of the law, the member imposed a penalty of Rs. 10,000, taking into account the appellant's sufficient balance in their PLA and the interest already paid. The excess CENVAT credit wrongly utilized was set aside as it was available to the appellant.

4. The appeal was disposed of with the imposition of a penalty and setting aside the demand for excess CENVAT credit. The judgment highlighted the importance of adhering to CENVAT credit rules and the consequences of mis-utilization, balancing penalties with circumstances and compliance.