2018 (9) TMI 1053 - AT - Central Excise

Penalty - excess CENVAT Credit availed - it was alleged that appellant availed credit of duty paid on capital goods on machinery twice - whether the penalty imposed on the appellant for the excess credit availed, is sustainable or not? Held that - It is brought out from the facts that the appellant has reversed the credit before utilization and that they had enough credit balance in their Cenvat Credit account for the disputed period - The Hon ble High Court in the case of Strategic Engineering (P) Ltd. 2014 (11) TMI 89 - MADRAS HIGH COURT has categorically held that when the credit has been reversed before utilization, the interest or the penalty imposed cannot sustain - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of credit on capital goods twice.
2. Eligibility of penalty on excess credit availed.

Analysis:
1. The appellants, engaged in manufacturing Nylon mono-filament Yarn, availed Cenvat Credit of duty paid on inputs, capital goods, and service tax on input services. The Department observed that credit on capital goods was claimed twice in April and June 2014, totaling ?1,88,712. A Show Cause Notice was issued for recovery with interest and penalties. The Original Authority confirmed the demand, interest, and penalties. The Commissioner (Appeals) remanded the issue to reconsider the wrongly availed credit but upheld the penalty. The appellant challenged the penalty before the Tribunal.

2. The appellant contended that the excess credit was reversed promptly upon detection, with no intention to evade duty payment. Citing precedent, the appellant argued that reversal before utilization absolves liability for interest or penalty. The Tribunal noted the appellant's action of reversing the credit and having sufficient balance in the Cenvat Credit account for the disputed period. Relying on a High Court ruling, the Tribunal concluded that when credit is reversed before utilization, penalties cannot be sustained. Consequently, the Tribunal set aside the penalty, allowing the appeal with any consequential reliefs.

This judgment highlights the importance of promptly rectifying inadvertent errors in availing credits to avoid penalties. The Tribunal's decision underscores the significance of compliance and corrective actions in mitigating potential liabilities arising from such errors.