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2018 (11) TMI 1372 - AT - Central ExciseIrregular availment of CENVAT Credit - 100% CENVAT credit on capital goods availed in the first year instead of 50% - credit was not utilized and was reversed - demand of interest and penalty - Held that - On account of bona fide mistake, the appellants have taken 100% CENVAT credit in the first year whereas they were entitled to take CENVAT credit up to 50% but as soon as they realized their mistake, they reversed the 50% before the issuance of SCN - also, they had sufficient balance in their CENVAT credit account and therefore, they have not utilized the said CENVAT credit and it was merely a book entry. In the case of CCE vs. Bill Forge 2011 (4) TMI 969 - KARNATAKA HIGH COURT , the Hon ble Karnataka High Court has held that if the credit was wrongly taken and not utilized and immediately reversed before the issuance of SCN, then the appellants are not required to pay interest and penalty. Demand of Interest and penalty not sustainable - appeal allowed - decided in favor of appellant.
Issues:
1. Upholding of demand of interest and increased penalty by Commissioner (A). 2. Appellants availed 100% CENVAT credit on capital goods instead of 50% during a specific period. 3. Show-cause notice issued for demanding CENVAT credit, interest, and penalty. 4. Appeal filed against the demand of interest and imposition of penalty. 5. Department's appeal against short imposition of penalty under Section 11AC of the Central Excise Act, 1944. 6. Appellants' submission of inadvertently availing 100% CENVAT credit due to a bona fide mistake. 7. Arguments based on legal precedents supporting the appellant's case. 8. Defense of the impugned order by the learned AR. 9. Tribunal's decision based on the mistake, reversal of credit, and sufficient balance in CENVAT account. 10. Application of legal precedents to conclude the unsustainability of the demand for interest and penalty. Comprehensive Analysis: 1. The issue in this case revolves around the demand of interest and increased penalty by the Commissioner (A) in response to the appellants availing 100% CENVAT credit on capital goods instead of the correct 50% during a specific period. The Commissioner (A) upheld the Order-in-Original, leading to the appeals being filed by both the appellants and the department against the respective decisions. 2. The facts of the case highlight that the appellants, engaged in manufacturing sugar and molasses, mistakenly availed 100% CENVAT credit instead of the prescribed 50%. Upon audit discovery, the appellants rectified the error by reversing the wrongly availed credit. Subsequently, a show-cause notice was issued demanding the CENVAT credit, interest, and penalty, leading to the current legal proceedings. 3. The appellant's appeal primarily focused on challenging the demand of interest and the imposition of penalty, citing inadvertent availing of the credit due to a bona fide mistake. Legal arguments were presented, supported by relevant case laws, emphasizing that the credit was not utilized and was promptly reversed before the show-cause notice was issued. 4. The learned AR defended the impugned order, presenting arguments in support of the decision taken by the Commissioner (A) to uphold the demand for interest and increase the penalty amount. The defense likely centered around the adherence to statutory provisions and the necessity of imposing penalties for non-compliance. 5. Upon hearing both parties and reviewing the case records, the Tribunal concluded that the appellants' mistake in availing 100% CENVAT credit was genuine and rectified by them before any formal notice was issued. The Tribunal also noted that the credit remained unused and was merely a book entry, with a sufficient balance in the CENVAT account during the relevant period. 6. The Tribunal's decision was influenced by legal precedents, notably the case of CCE vs. Bill Forge, which established that if wrongly taken credit is not utilized and promptly reversed before a show-cause notice, interest and penalty may not be applicable. By applying the principles from this and other cited cases, the Tribunal ruled in favor of the appellants, setting aside the demand for interest and penalty. In conclusion, the Tribunal's judgment favored the appellants based on the genuine mistake made in availing the CENVAT credit, the timely reversal of the credit, and the lack of utilization of the credit amount. The decision was further supported by legal precedents emphasizing the non-applicability of interest and penalty in such circumstances.
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