2018 (8) TMI 353 - AT - Central Excise

Penalty - Reversal of CENVAT Credit - common input services used in manufacture of dutiable goods as well as exempted goods - Rule 6 (3A) of CENVAT Credit Rules, 2004 - Held that - Admittedly, the appellant had sufficient balance in their CENVAT Credit account and had not utilized CENVAT credit in dispute. The show cause not does not make express allegation of suppression or wilful misstatement. In the absence of this, the penalty is liable to be set aside. In similar circumstances, where assessee had availed wrong Cenvat credit but had not utilized the same and had reversed the credit after being pointed out by the audit party, in the case of Flextronics Technologies (India) Pvt.Ltd. 2015 (10) TMI 709 - KARNATAKA HIGH COURT , it was held that penalty is liable to be set aside. The demand of duty is upheld - penalty set aside - appeal allowed in part.

Summary

Issues:
1. Availing Cenvat credit on common input services for manufacturing dutiable and exempted goods.
2. Demand of duty and penalty imposition under Cenvat Credit Rules, 2004.
3. Contesting penalty imposition by the appellant.
4. Applicability of judgments on penalty imposition.

Analysis:
1. The appellant was availing Cenvat credit on common input services for manufacturing both dutiable and exempted goods, leading to a demand of duty amounting to ?12,52,024 under Rule 6(3) (ii) of Cenvat Credit Rules, 2004. The appellant admitted the mistake and deposited the demanded amount. A show cause notice was issued, demanding the same along with interest and proposing a penalty under Section 11AC read with Rule 15 of Cenvat Credit Rules, 2004.

2. The adjudicating authority confirmed the demand and appropriated the deposited amount but did not impose interest. However, a penalty of ?12,52,024 was imposed under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The Commissioner (Appeals) rejected the appellant's appeal, leading to the appeal before the Tribunal.

3. The appellant contested only the penalty imposition, not disputing the demand. The appellant argued that since the amount was paid promptly after being pointed out, and there was a sufficient balance in their Cenvat Credit account, the penalty should not be imposed. Citing judgments from the Hon'ble Karnataka High Court, the appellant sought relief from penalty imposition.

4. After hearing both sides, the Tribunal found that the demand of duty was upheld, as the appellant had not contested it. However, considering that the appellant had promptly reversed the Cenvat credit and had not utilized it, the Tribunal set aside the penalty imposition. Referring to the judgments on similar circumstances, the Tribunal concluded that there was no intention to evade tax, leading to the setting aside of the penalty.

In conclusion, the Tribunal upheld the demand of duty but set aside the penalty imposed under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC. The appeal was disposed of accordingly.