2018 (11) TMI 829 - AT - Central Excise

Imposition of penalty - suppression of alleged availment of inadmissible credit even after subsequent reversal upon audit noting before issue of show cause - Held that - Admittedly, appellant s availment of Cenvat credit which was held by the audit party is inadmissible is not being questioned in this appeal about its legality. In his Order-in-Appeal the commissioner has distinguished the appellant s case in respect of earlier decisions concerning the appellant on similar issue passed by the adjudicating authority and he hold that previous audit cannot be taken as a plea of non-suppression. Section 11AC which deals with penalty on short levy or non levy of duty clearly indicates under 1(C) that such suppression of fact must have been done with intend to evade payment of duty and the intention of the appellant is found absent in the sense that its availment of allegedly inadmissible credit was previously subjected to scrutiny by the audit parties at least on three occasions as reveals from the audit report vide Exhibit (I), Exhibit (J) and Exhibit (K) of the period under dispute - appellant had not only reversed the credit which was held by the audit party as inadmissible but had also intimated the fact of such reversal by e-mail to the competent authority. Audit being one of the ways by which departmental authorities can bring the fact of inadmissibility of credit to the knowledge of the assessee on verification of its document for which no specific mode is prescribed in the statute for suo moto submission of Cenvat Credit documents or related information to Excise Department and self assessment mechanism being introduced, it cannot be said that any suppression of fact has been established against the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty on grounds of suppression of alleged availment of inadmissible credit even after subsequent reversal upon audit noting before the issue of the show cause.

Analysis:
The case involves the imposition of a penalty on the appellant for allegedly availing inadmissible Cenvat Credits, which were later reversed after an audit. The appellant, a large taxpayer, was subjected to CERA and EA-2000 audits annually. The audit in June 2016 revealed inadmissible credits amounting to ?8,71,885 for the period between Oct-11 to Mar-15, which were immediately reversed. However, a show cause notice was issued, questioning the appellant's willful suppression of facts and deliberate non-disclosure of input services. The first adjudicating authority imposed a penalty equivalent to the inadmissible credit, which was upheld by the Commissioner (Appeals).

During the appeal, the appellant argued that there was no specific mode prescribed for submitting Cenvat Credit documents to the Excise Department. They contended that previous audits did not raise any objections, and the alleged erroneous credit was a small percentage of the total credit availed. The appellant cited favorable past decisions as judicial precedent. The Department, represented by the Learned AR, supported the Commissioner's findings, emphasizing that the appellant misstated expenses as eligible credits and that the appellant's conduct was not bona fide.

The Tribunal, after considering arguments from both sides and reviewing case records and judicial decisions, found that the inadmissible credit availed by the appellant was not in question. The Commissioner held that previous audits could not be used as a defense of non-suppression. The Tribunal referred to manuals on EA and CERA audits, highlighting the purpose of verification to ensure tax compliance and revenue protection. The Tribunal noted that the audit findings did not automatically imply suppression of facts.

The Tribunal also addressed the appellant's reliance on a Supreme Court case, emphasizing that suppression of fact under Section 11AC must be intentional to evade duty payment. Given the appellant's past audit history, the small percentage of inadmissible credit compared to total payments, and the proactive reversal of credits, the Tribunal concluded that no suppression of fact was established. Consequently, the appeal was allowed, setting aside the Commissioner (Appeals) order.