2018 (5) TMI 1042 - AT - Central Excise

Excess availment of CENVAT credit - transfer of an amount from basic customs duty to Education Cess/Secondary & Higher Education Cess without debiting the same in BED account - demand of interest and penalty - Held that - Education Cess/Secondary & Higher Education Cess were debited as paid without an amount in credit in respect of two cess, inasmuch as transfer of credit from basic excise duty to Education Cess/Secondary & Higher Education Cess is not complete unless there is debit in the BED account Undisputedly, the appellant had not debited the BED with an amount which has been used for payment of Education Cess/Secondary & Higher Education Cess - demand of interest upheld. Penalty - Held that - this act of non-debiting the basic excise duty would not attract stringent imposition of equal penalty under section 11AC or under rule 15(2) of Cenvat Credit Rules, 2004 inasmuch that there is no intention to evade duty and the clearances of the goods were effected by showing debit in Education Cess/Secondary & Higher Education Cess account - there is no warrant to visit the appellant with penalties under any provisions of Central Excise Act and the Rules made there under - penalties set aside. Appeal allowed in part.

Summary

Issues:
Excess availment of CENVAT credit during June 2012 to May 2013, demand for interest and imposition of penalties, contesting the demand for interest and penalties, applicability of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with section 11AC of the Central Excise Act, 1944, correctness of interest liability, correctness of penalty imposition, human error in non-debiting the amount in basic excise duty account, intention to evade duty, clearance of goods with proper debit in Education Cess/Secondary & Higher Education Cess account.

Analysis:

The appeal was against the order-in-appeal regarding excess availment of CENVAT credit during June 2012 to May 2013. It was observed that the appellant transferred an amount from basic customs duty to Education Cess/Secondary & Higher Education Cess without debiting the same in the BED account. The appellant argued that they had sufficient balance in the BED account and had debited the amount in their accounts but failed to inform Revenue authorities by showing the debit in the CENVAT account. The authorities issued a show-cause notice for demand of interest, penalties, and appropriation of the debited amount. Both authorities confirmed the demand, interest, and penalties.

The appellant contested the demand for interest and penalties, claiming no interest was payable due to sufficient balance in the BED account, and the non-debiting was a clerical error without causing any loss to the Government. The penalty imposition under Rule 15(2) of the Cenvat Credit Rules, 2004 read with section 11AC of the Central Excise Act, 1944 was challenged as not applicable in this case.

After considering submissions, it was found that interest liability was correctly imposed as Education Cess/Secondary & Higher Education Cess were paid without the required credit in the account. The non-debiting in the BED account led to the correct imposition of interest. However, regarding penalties, it was noted that the appellant had sufficient balance in the BED account, and the error was rectified promptly after being pointed out. The act of non-debiting was deemed a human error without intent to evade duty, as clearances were made with proper debits in the Education Cess/Secondary & Higher Education Cess account. Therefore, the penalty imposition was set aside as there was no warrant to penalize under the Central Excise Act and Rules.

In conclusion, the interest liability was upheld, but the penalty imposition was set aside due to the human error in non-debiting the amount in the basic excise duty account, which was rectified promptly without any intention to evade duty.