2017 (5) TMI 275 - AT - Central Excise

Penalty - CENVAT credit - duty paying invoices - appellant claims that there has been no deliberate attempt to claim ineligible credit and that the promptitude with which the said credits are reversed should have enabled the jurisdictional authorities to take recourse to section 11A(2B) of CEA, 1944 - Held that - it cannot but be emphasised that the statute itself provides halting further proceedings when duty and interest has been paid forthwith and there is no sustainable evidence to invoke the ingredients necessary for imposition of penalty - the SCN, as well as the orders of the lower authorities, do not establish that the appellant had demonstrated deliberate intent in availing ineligible CENVAT credit - there was no reason to issue the show cause notice and, consequently, to impose penalty - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to disallowed CENVAT credit, invoices not in name, credit not related to input, imposition of penalty.

Analysis:
The appellant, M/s Padma Flashlights Pvt Ltd, contested the order disallowing CENVAT credit of &8377; 92,854, which included amounts not in their name or address and not related to inputs used in manufacturing. The appellant reversed the disputed amounts promptly in March 2010 upon audit pointing out the discrepancies. The appellant argued that there was no deliberate attempt to claim ineligible credit and that the reversal of credits should have led to the application of section 11A(2B) of the Central Excise Act, 1944. The appellant relied on precedents like Empee Offset Pvt Ltd and Shree Shyam Prestressed Industries to support their contention that the extended period should not have been invoked without specific allegations in the show cause notice, citing the Maharashtra State Electricity Board case.

The Authorized Representative, however, supported the original authority's findings of a deliberate attempt to claim undue credit. They referenced decisions from the High Courts of Bombay and Karnataka to bolster their argument. While acknowledging the case for penalty based on the decisions cited by the Authorized Representative, it was noted that the statute allows for halting proceedings when duty and interest are paid promptly and there is no clear evidence of deliberate intent to avail ineligible credit. The show cause notice and lower authorities' orders did not establish deliberate intent on the appellant's part. Therefore, it was deemed equitable to conclude that there was no basis for issuing the show cause notice and subsequently imposing penalties.

Consequently, the appeal was allowed, and the penalties imposed by the original authority and sustained in the impugned order were set aside.