2017 (5) TMI 281 - AT - Central Excise

Penalty - interest - CENVAT credit - countervailing duty paid on the raw materials imported - the said imported raw material could not have been consumed due to quality problems and they discharged appropriate customs duty, countervailing duty on the raw material imported by the appellant and availed CENVAT credit of the duty paid, which was reversed on being pointed out - Held that - Imposition of penalty under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 is incorrect, inasmuch as the said Rule starts that penalty can be imposed by invoking the extended period only if ineligible CENVAT credit is availed with an intent to evade duty - the imported goods has not been utilised by the appellant with intent to evade payment of duty, the provisions of Section 11AC read with Rule 15 of the CCR, 2004 does not apply in this case - penalty set aside. As regards the interest, the appellant requires to discharge interest - The Hon ble apex Court in the case of Union of India v. Ind-Swift Laboratories Ltd 2011 (2) TMI 6 - Supreme Court has held that interest liability arises even if the CENVAT credit is not utilised - interest demand upheld. Appeal allowed - decided partly in favor of assessee.

Summary

Issues:
Availment of CENVAT credit on imported raw materials, imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004, applicability of Section 11AC of the Central Excise Act, 1944, interest liability on unutilized CENVAT credit.

Analysis:
The appeal concerned the availment of CENVAT credit on raw materials imported under an advance license, which were later found to be defective and not utilized, leading to the reversal of the credit by the appellant. The Revenue issued a show cause notice for appropriation of the reversed amount, charging interest, and imposing a penalty under Rule 15 of the CENVAT Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944. The adjudicating authority confirmed the demand and penalties, which were contested before the first appellate authority. The first appellate authority upheld the penalties, leading to the appeal before the Tribunal.

Upon review, the Tribunal noted that the appellant did not contest the availment of CENVAT credit but challenged the imposition of penalties. The Tribunal found that the penalties imposed were not justified as the appellant had reversed the credit upon realizing the inability to use the raw materials for manufacturing export products. The Tribunal emphasized that penalties can only be imposed for availing ineligible credit with an intent to evade duty, which was not the case here. Referring to the judgment in ECE Industries Ltd v. Commissioner of Central Excise, the Tribunal set aside the penalties imposed by the lower authorities.

Regarding interest liability, the Tribunal held that the appellant was liable to pay interest even if the CENVAT credit was not utilized, citing the precedent in Commissioner of Central Excise, Mumbai-I v. Bombay Dyeing & Mfg. Co. Ltd. and Union of India v. Ind-Swift Laboratories Ltd. Consequently, the Tribunal upheld the interest liability but set aside the penalties imposed, disposing of the appeal accordingly.

In conclusion, the Tribunal upheld the interest liability on the appellant but set aside the penalties imposed by the lower authorities, emphasizing that penalties can only be imposed for availing ineligible credit with an intent to evade duty, which was not established in this case. The judgment highlighted the importance of following legal provisions and precedents in determining the liability of parties in excise matters.