2016 (11) TMI 1105 - AT - Central Excise

CENVAT credit - forged documents - imposition of penalty - Held that - I find that the credit wrongly availed by the assessee on the basis of the invoice, in the name of their Kalamb unit was otherwise available to their Kalamb unit. To err is human and in as much as the error is on the part of the employee responsible for making entries in RG-23 (a) part II, who had recently joined, I conclude that there was no malafide intention on the part of the assessee so as to impose penalty upon them - Similarly in respect of availment of credit on the basis of Bill of Entry the same was available to them on receipt of the goods. As such it is only a question of time of availament of credit and such pre mature availment has not benefitted the assessee in as much as the credit availed was not put to use on account of already overflowing credit available with the assessee. This act of the appellant cannot be held to be a malafide intention so as to invoke the penal provisions against them. I find no justifiable reasons to impose penalty on the appellant. Accordingly, the same is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Cenvat Credit availment based on incorrect documents, double availment of credit, premature availment of credit against Bill of Entry, imposition of penalty under Rule 15(2) of Cenvat Credit Rules.

Analysis:
1. The appellant, engaged in manufacturing air conditioners, availed Cenvat Credit on duty paid inputs under Chapter 84. During a visit by Central Excise officers, discrepancies were found in the credit availed. These included availing credit based on documents from another unit, double credit for one invoice, and premature credit against a pending Bill of Entry.

2. The appellant's representative admitted to the errors, attributing them to receiving documents from the Himachal Pradesh unit, clerical mistakes, and oversight. The appellant promptly debited the excess credit amount of ?21,75,684 on the same day it was discovered.

3. Subsequently, a show cause notice was issued proposing confirmation of the debit entry, interest, and penalty under Rule 15(1) of the Cenvat Credit Rules. The Original Adjudicating Authority confirmed the denial of credit and imposed a penalty, which was upheld by the Commissioner (A), leading to the appellant's appeal against the penalty imposition.

4. The appellant's advocate contended that while not contesting the credit reversal, the penalty imposition was unjustified. The errors were clarified as inadvertent actions, promptly rectified, and not utilized during the relevant period. The reversal of credit without utilization should have concluded the proceedings per section 73(3) of the Finance Act.

5. The Tribunal, after considering the submissions, agreed that the reversal of irregularly availed credit before the show cause notice issuance should have concluded the matter. The errors were deemed non-malafide, with no intention to evade duty, especially considering the excess credit was not utilized.

6. The Tribunal found no grounds for penalty imposition, setting it aside and allowing the appeal. However, the duty confirmation portion of the order was upheld. The judgment was pronounced on 21.11.2016 by Hon'ble Ms. Archana Wadhwa, Member (Judicial) of the Appellate Tribunal CESTAT NEW DELHI.