2018 (11) TMI 160 - AT - Central Excise

Demand of interest and penalty - appellant has reversed the credit even before issuance of the SCN - Held that - The appellant has reversed the credit even before issuance of the show cause notice. It is also not the case of the department that they have utilized the credit - the demand of interest and penalty cannot sustain - duty demand upheld - appeal allowed in part.

Summary

Issues:
1. Irregular availed credit not reversed in balance sheet.
2. Recovery of irregularly availed credit along with interest and penalty.
3. Contesting interest and penalty imposition.
4. Reversal of credit before utilization.
5. Applicability of legal precedents in deciding interest and penalty.

Analysis:
1. The appellant had provisions for write off of old inputs in the balance sheet of 2014-15 but did not reverse the credit for such inputs. The authorities issued a show cause notice to recover the irregularly availed credit along with interest and penalty. The original authority confirmed the demand, interest, and imposed a penalty, which was upheld by the Commissioner (Appeals), leading to the present appeal.

2. The appellant contested only the interest and penalty imposition. The consultant for the appellant argued that the appellant had reversed the irregularly availed credit upon being pointed out and had sufficient credit balance during the disputed period. Citing legal precedents, the consultant requested the waiver of interest and penalty due to the timely reversal of credit before utilization.

3. The Assistant Commissioner (AR) supported the findings in the impugned order, advocating for the interest and penalty imposition as per the original decision.

4. The Tribunal noted that the appellant had indeed reversed the credit even before the show cause notice was issued, and there was no evidence of credit utilization by the appellant. Relying on legal precedents, including the decision of the Hon'ble High Court of Madras and a Tribunal decision, the Tribunal concluded that the demand for interest and penalty could not be sustained. Consequently, the Tribunal set aside the interest and penalty while upholding the duty demand and the appropriation of the irregularly availed credit. The appeal was partly allowed with consequential relief, if any.

5. The Tribunal's decision was based on the appellant's timely reversal of credit before utilization, aligning with legal precedents that supported the waiver of interest and penalty in such circumstances. The judgment highlighted the importance of following established legal principles and case law in determining the appropriate course of action in cases involving irregularly availed credit and subsequent reversal.