2018 (6) TMI 43 - HC - Central Excise

Cenvat Credit wrongly availed - Demand of Interest and penalty - reversal of ineligible credit on being pointed out, prior to its utilization - Rule 6 of CCR - Held that - Since the credit had been reversed by the respondent prior to its utilisation, the Tribunal rightly held the demand of interest unsustainable. Penalty - intent to evade duty - Held that - since there was no intention to evade payment of duty on the part of the respondent, the same was also held to be unwarranted. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the Tribunal was justified in holding that the extended period is not invokable?
2. Whether the Tribunal was right in holding that the penalty is not to be imposed and interest cannot be charged under the provisions of the Central Excise Law?

Analysis:

Issue 1:
The appellant-revenue filed an appeal under Section 35G of the Central Excise Act against the impugned order passed by the Tribunal. The respondent had availed Cenvat credit of service tax on input service used in the manufacture of both dutiable and exempted goods, contrary to Rule 6(1) of the Cenvat Credit Rules, 2004. The Department pointed out this discrepancy, leading to the respondent reversing the credit amount under protest. A show cause notice was issued, and the demand of inadmissible credit, interest, and penalty were confirmed. The Tribunal, in its order, focused on the demand of interest and imposition of penalty. It held that as the credit had been reversed before utilization, the demand of interest was unsustainable. The Tribunal also noted that there was no suppression of facts or willful misstatement by the respondent, leading to the conclusion that the imposition of penalty was unwarranted. The Tribunal's decision was supported by case law, emphasizing that reversal of wrongly availed credit before utilization does not justify the demand of interest.

Issue 2:
Regarding the imposition of penalty, the Tribunal observed that the show cause notice was issued within the period of limitation and found no grounds for invoking the extended period. The Tribunal highlighted that the respondent had provided explanations and details regarding the availing of credit when requested by the Department. It concluded that there was no intention on the part of the respondent to evade payment of duty, thus deeming the imposition of penalty unwarranted. The Tribunal's reasoning was based on the lack of evidence establishing suppression or willful misstatement by the respondent. The appellant-revenue failed to demonstrate any illegality or perversity in the Tribunal's findings. Consequently, the appeal was dismissed as no substantial question of law arose from the Tribunal's decision.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the reversal of credit before utilization rendered the demand of interest unsustainable. Additionally, since there was no intention to evade payment of duty, the imposition of penalty was deemed unwarranted. The Court found no grounds to differ with the Tribunal's view, leading to the dismissal of the appeal.