2018 (11) TMI 223 - AT - Central Excise

Liability of Interest and penalty - credit of Education Cess and Secondary & Higher Education Cess subsumed in the opening balance of cenvat credit as on 01.03.2015 - Held that - The facts was very much in the knowledge of the Revenue. Therefore, there is no suppression of fact on the part of the appellant, accordingly, the penalty imposed under Section 11AC is not imposable. Demand of Interest - Held that - If at all, there is availment of wrong credit w.e.f 01.03.2015 only, however, from 01.03.2015 till the reversal of the credits the appellant have not utilized the said amount. As per the amended Rule 14 w.e.f. 01.03.2015, the interest is chargeable for the act of wrong availment of credit only when the assessee wrongly availed and utilized the cenvat credit - In the present case the credit of Education Cess and Secondary & Higher Education Cess was subsumed in the opening balance of March 2015. Since till the date of reversal, it was not utilized, therefore, the interest is not chargeable - interest demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay interest on the credit of Education Cess and Secondary & Higher Education Cess subsumed in the opening balance of cenvat credit as on 01.03.2015.
2. Liability for penalty under Section 11AC.

Analysis:

Issue 1: Liability to pay interest on the credit of Education Cess and Secondary & Higher Education Cess subsumed in the opening balance of cenvat credit as on 01.03.2015:
The appellant had subsumed the balance of Education Cess and Secondary & Higher Education Cess into the cenvat credit of basic excise duty and service tax. The department contended that the appellant was not entitled to carry forward the balance of Education Cess and Secondary & Higher Education Cess as on 01.03.2015 due to changes in the Union Budget 2015-16. The appellant had shown the balance separately in the ER-1 Returns of February 2015 but later subsumed it in the opening balance of cenvat credit for March 2015. The appellant reversed the credit upon audit scrutiny and subsequent notice of demand. The adjudicating authority confirmed the demand and imposed penalties. However, the appellant argued that no interest should be charged as the credit was not utilized after being reversed. The Tribunal found that the interest is chargeable only when the credit is wrongly availed and utilized, which was not the case here. Therefore, the demand of interest was set aside.

Issue 2: Liability for penalty under Section 11AC:
The appellant contended that there was no suppression of facts as they had declared the balance of Education Cess and Secondary & Higher Education Cess separately in their returns. The Tribunal agreed that there was no suppression of facts, and since the appellant had not utilized the credit after reversal, the penalty under Section 11AC was deemed not imposable. The Tribunal also referenced a similar case where no interest was payable and no penalty was imposable, which had attained finality. Therefore, the penalty imposed under Section 11AC was set aside.

In conclusion, the Tribunal held that while the demand of cenvat credit in respect of Education Cess and Secondary & Higher Education Cess was maintained, the demand of interest and penalty was set aside. The appeal was allowed in favor of the appellant.