2018 (8) TMI 478 - AT - Central Excise

Liability of Interest and Penalty - reversal of wrongly availed CENVAT Credit before issuance of SCN - whether the appellants are liable to pay interest and penalty on the wrongly availed Cenvat Credit amounting to ₹ 94,208/- despite the fact that much before the issuance of show cause notice they have reversed the same? Held that - The appellants immediately reversed the Cenvat Credit wrongly availed by them on pointing out by the Department. This itself shows that there is no intention on the part of the appellants to evade payment of tax rather they were having sufficient balance in their Cenvat Credit account - To attract levy of penalty as per the provisions of Section 11AC of the Central Excise Act 1944 the Revenue has to prove that the appellant has availed the Cenvat Credit wrongly by reason of fraud or collusion or any willful misstatement or suppression of facts, which the Department has failed to establish in the present case. Since the appellants did not utilized the cenvat credit wrongly taken and reversed it before utilization, therefore, it amounts to non-taking of credit. Hon ble High Court of Karnataka at Bangalore in the matter of CCE & ST, Bangalore V/s Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT has held that since the appellants therein was having sufficient balance in their Cenvat Credit account, therefore, the appellant is not liable to pay the interest. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Whether appellants are liable to pay interest and penalty on wrongly availed Cenvat Credit despite reversal before show cause notice.

Analysis:
The appeal was filed against the Commissioner (Appeals) order confirming the demand for wrongly availed Cenvat Credit of ?94,208 along with interest and penalty. The appellants reversed the credit before the show cause notice was issued, indicating no intention to evade tax. The appellant's counsel argued lack of malafide intent, suppression, or fraud, emphasizing the immediate repayment upon discovery. The Department's representative supported the impugned order. The Tribunal noted the timely reversal by the appellants upon audit team's notification, preceding the show cause notice. The Revenue failed to prove fraud, collusion, willful misstatement, or suppression of facts, necessary for penalty under Section 11AC. The appellants' non-utilization of the credit and the sufficient balance in their Cenvat Account further supported the lack of fraudulent intent. Citing a similar case precedent, the Tribunal ruled in favor of the appellant, setting aside the interest and penalty demands. The decision aligned with the Hon'ble Karnataka High Court's ruling and previous Tribunal orders, emphasizing the lack of malafide intent and the appellants' prompt corrective action. Consequently, the appeal was allowed on 08/08/2018.

Conclusion:
The Tribunal's judgment favored the appellant, emphasizing the absence of fraudulent intent in the wrongful Cenvat Credit availing case. The immediate credit reversal, lack of utilization, and sufficient account balance demonstrated compliance and negated penalty imposition. The decision aligned with legal precedents and established principles, setting aside the interest and penalty demands based on the lack of malafide intent and the appellants' proactive corrective measures.