2016 (3) TMI 303 - AT - Central Excise

Cenvat Credit as per Notification no. 35/2003-CE (NT) - extended period of limitation invoked - reversal of cenvat credit - penalty imposed - Held that - There is no suppression of any fact or any willful misstatement made by the appellant so as to justify invoking the extended period of limitation, and further the appellant has admitted his mistake and reversed the Cenvat Credit. Further, the contention of the appellant that notification clarifying the earlier notification was not published when he availed the Cenvat Credit; this may be a bonafide mistake on account of which he has availed Cenvat Credit. Therefore, in such a situation, the appellant is not liable to penalty. But the appellant is certainly liable to pay interest on the said amount as per the rate applicable under the provisions of the Section 11AB of the Central Excise Act, 1944. Therefore, partly allow the appeal by setting aside the penalty imposed on the appellant and hold that the appellant is liable to pay interest from the date he availed the Cenvat Credit till he reversed the same as per the provisions of Section 11AB of the Central Excise Act. - Decided partly in favour of assessee

Issues:
1. Availment of Cenvat Credit under compound levy scheme.
2. Correctness of Cenvat Credit availed and subsequent reversal.
3. Validity of show-cause notice and extended period of limitation.
4. Liability for interest and penalty.

Analysis:

Issue 1: Availment of Cenvat Credit under compound levy scheme
The case involved the appellant engaged in manufacturing embroidery fabrics under Chapter 5805.19 of the Central Excise Tariff Act, 1985. The duty liability on embroidery was discharged under the compound levy scheme until a certain date, and the Cenvat Credit facility was later extended to textiles by relevant notifications. The appellant availed Cenvat Credit based on the initial notification, which was later amended without prior notice to the appellant. The appellant furnished details of Cenvat Credit availed before the amendment, which was later found to be incorrect by the department.

Issue 2: Correctness of Cenvat Credit availed and subsequent reversal
The appellant argued that there was no deliberate attempt to avail Cenvat Credit wrongly and that the erroneously availed credit was not utilized for duty payment. The department contended that the appellant deliberately and with malafide intention availed inadmissible Cenvat Credit. However, the appellant promptly reversed the wrongly availed Cenvat Credit upon detection by the department, indicating a lack of fraudulent intent.

Issue 3: Validity of show-cause notice and extended period of limitation
The appellant challenged the show-cause notice issued after an extended period from the date of audit, arguing that there was no willful misstatement or suppression of facts justifying the extended limitation period. The Tribunal considered the circumstances and found no suppression or willful misstatement by the appellant, leading to the conclusion that the extended limitation period was not warranted in this case.

Issue 4: Liability for interest and penalty
After considering the arguments and facts presented, the Tribunal held that the appellant was not liable for penalty due to the absence of willful misstatement or suppression. However, the appellant was found liable to pay interest on the amount of wrongly availed Cenvat Credit as per the provisions of Section 11AB of the Central Excise Act, 1944. The appeal was partly allowed, setting aside the penalty but upholding the liability for interest.

In conclusion, the Tribunal ruled in favor of the appellant, determining that while interest was payable on the wrongly availed Cenvat Credit, no penalty was warranted in this case due to the absence of fraudulent intent or willful misstatement.

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