2017 (10) TMI 496 - AT - Central Excise

Demand of interest - CENVAT credit taken wrongly - appellant has immediately reversed the CENVAT credit excess taken by them - Rule 3(7)(a) of CCR, 2004 - Held that - It is a fact on record that the appellant was having sufficient balance in their Cenvat credit account - following the ratio laid down by Hon ble Karnataka High Court in the case of Bill Forge 2011 (4) TMI 969 - KARNATAKA HIGH COURT , the appellant is not liable to pay the interest - demand of interest set aside. Penalty - Held that - the appellant immediately reversed the CENVAT credit excess availed by them on pointing out by the department. Therefore, in that circumstances, malafide cannot be attributable against the appellant and no proceedings were required to be initiated against the appellant u/s 11A (2B) of the Act - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Interest, Imposition of penalty

Interest:
The appellant appealed against an order demanding interest, penalty, and waiver of demand imposed by them after procuring goods from an EOU and availing cenvat credit. The department pointed out that the appellant was entitled to cenvat credit as per Rule 3(7)(a) of Cenvat Credit Rules, 2004. However, the appellant immediately reversed the excess cenvat credit upon notification by the department. The appellant argued that they had sufficient balance in their cenvat credit account, citing a decision by the Honorable Karnataka High Court. The Tribunal agreed with the appellant, setting aside the demand for interest based on the appellant's sufficient cenvat credit balance.

Imposition of Penalty:
The appellant reversed the excess cenvat credit upon being informed by the department, indicating no malafide intention. The department argued that ignorance of the law is not an excuse and the appellant should be penalized. However, the Tribunal found that since the appellant promptly rectified the excess cenvat credit upon notification, there was no malafide intention. The Tribunal agreed that ignorance of the law is not a valid excuse but noted that the appellant's immediate action to reverse the credit indicated no malafide intention. Consequently, the Tribunal held that no penalty should be imposed on the appellant.

In conclusion, the Tribunal set aside the demand for interest and penalty imposed on the appellant, allowing the appeal in favor of the appellant.