2017 (2) TMI 825 - AT - Central Excise

Cenvat credit - Capital goods - Penalty - Held that - I find strong force in the contentions raised by learned Counsel that the show-cause notice dated 13th February 2006 is demanding an interest and penalty for an amount which cannot be confirmed beyond five years - In the case in hand the demand of ineligible CENVAT credit by a show-cause notice dated 13th February 2006 is for a period beyond five years except for two entries. As regards two credit availed within period of five years from show-cause notice I find that there is no allegation in show-cause notice as the CENVAT credit was availed with intent to evade duty. There could be a genuine error as understanding of the issue which is fortified from the fact that the amounts were reversed despite not required to do so - Appeal allowed.

Summary

Issues:
- Appellant availed CENVAT credit of capital goods incorrectly
- Demand of interest and imposition of equivalent penalty
- Interpretation of Section 11A of Central Excise Act, 1944
- Allegation of intent to evade duty for credit availed within five years
- Correctness of the adjudication order

Analysis:
The appeal was against an Order-in-Appeal that confirmed interest liability and imposed an equivalent penalty on the appellant for incorrectly availing CENVAT credit of capital goods. The appellant had reversed the credit following an audit, but a show-cause notice demanded the reversed credit, interest, and penalty. The adjudicating authority confirmed the reversal but dropped the interest and penalty proceedings. The first appellate authority set aside the Order-in-Original, leading to the Revenue appealing. The judge noted the dates of credit availed and pointed out that the demand for interest and penalty beyond five years from the show-cause notice was not sustainable under Section 11A of the Central Excise Act, 1944, except for two entries. The judge emphasized that without sustainable reversal of CENVAT credit, there cannot be a demand for interest and penalty.

Regarding the two credits availed within five years from the show-cause notice, the judge highlighted the absence of an allegation of intent to evade duty. The judge observed that there could have been a genuine error, considering the amounts were reversed voluntarily. The judge concluded that the adjudicating authority's view was correct, and the first appellate authority erred in setting it aside. Consequently, the impugned order was deemed unsustainable and set aside, allowing the appeal in favor of the appellant. The judgment was pronounced in court on 24.01.2017.