2017 (7) TMI 14 - AT - Central Excise

Penalty - unutilised CENVAT credit - the appellant availed the input credit wrongly twice and when it was pointed, the same was reversed with interest of ₹ 82,256/- which was paid on 19.2.2008 - Held that - in the SCN, the Revenue has not alleged any suppression or fraud or willful misstatement with intention to avail irregular credit, and; as and when it was pointed out, the same was reversed. Since there was no allegation of suppression, therefore the extended period of limitation is wrongly invoked to impose penalty on the appellant as the necessary ingredient of Section 11AC of the Central Excise Act is missing in the present case - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Demand of interest on irregularly availed CENVAT credit
- Allegation of suppression and imposition of penalty
- Invocation of extended period for imposition of penalty

Analysis:

1. Demand of interest on irregularly availed CENVAT credit:
The appeal was against the rejection of the appellant's appeal by the Commissioner (A) regarding the irregular availment of CENVAT credit. The appellant had availed credit of duty twice on the same invoices, which was pointed out during a departmental audit. The appellant paid the irregularly availed amount but did not pay the full interest as required by the CENVAT Credit Rules. A show-cause notice was issued for recovery of the remaining interest and imposition of penalty. The appellant argued that the demand of interest on the unutilized credit, which was reversed without notice, was impermissible. The appellant relied on the decision in J.K. Tyre and Industries Ltd. Vs. ACCE to support their argument.

2. Allegation of suppression and imposition of penalty:
The appellant contended that the impugned order was unsustainable as it did not consider the facts and evidence on record. The appellant argued that the notice for demand of interest and penalty was time-barred as there was no allegation of suppression, and the reversal of credit was done earlier. They cited the case of Paper Products Ltd. Vs. CCE to support their argument. The appellant also referred to Hindustan Petroleum Corporation Ltd. Vs. CCE to emphasize that the extended period of limitation for penalty imposition was not applicable without the necessary ingredients under Section 11AC of the Central Excise Act.

3. Invocation of extended period for imposition of penalty:
The AR supported the findings of the impugned order, stating that the extended period was rightly invoked due to the irregular availment of CENVAT credit being noticed during an audit. However, the Tribunal found that since there was no allegation of suppression or willful misstatement to avail irregular credit, the extended period for penalty imposition was wrongly invoked. The Tribunal ruled in favor of the appellant, setting aside the penalty based on the absence of necessary ingredients for penalty imposition under Section 11AC of the Central Excise Act.

In conclusion, the Tribunal allowed the appeal of the appellant, emphasizing that the imposition of penalty was not sustainable in law due to the absence of allegations of suppression and the incorrect invocation of the extended period for penalty imposition.