2019 (7) TMI 902 - AT - Central Excise

Irregular reversal of CENVAT Credit - the bone of contention between the appellant and the Department is the quantum of the amount to be reversed under Rule 6(3A) of CENVAT Credit Rules - reversal as per formula as specified in Clause (c) of sub rule (3A) of Rule 6 of Cenvat Credit Rules, 2004 or not - HELD THAT - The Commissioner (Appeals) has observed that the appellants have not produced sufficient document to verify the reversal but the appellant has given full details of reversal in the appeal memorandum with detailed worksheets but the same was not allegedly produced before the Commissioner (Appeals). As per the Department the appellant has less reversed ₹ 1,77,784/- and the appellant in order to settle the issue has agreed to reverse the ineligible cenvat credit aggregating ₹ 1,77,785/- which mainly arose due to difference in computation as per the Central Excise Department and as per the certificate issued by the Chartered Accountant. Further the appellant has also agreed to make payment of the interest aggregating ₹ 2,25,962/- due to delay in reversal of cenvat credit as per the computation given at the time of argument. Since as per the details given by the appellant, he has reversed specific amount for the disputed period except ₹ 1,77,784/- which is liable to be reversed along with interest of ₹ 2,25,962/-. Penalty - HELD THAT - The Department has not brought any material on record to show that the appellant has suppressed the material fact with intent to evade the payment of duty. All the details were given in the books of accounts and also in ER-1 return from time to time which was audited by the Department - the substantial amount of cenvat credit was reversed before the issuance of show-cause notice, therefore the appellant is not liable to pay penalty - the appellants are not liable to pay the penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act. The appeal of the appellant is allowed subject to the verification of the reversal of ineligible credit made by the appellant as per the formula specified in clause (c) of sub-rule (3A) of Rule 6 of Cenvat Credit Rules 2004. Appeal allowed by way of remand.

Summary

Issues:
1. Appellants' liability to reverse cenvat credit under Rule 6(3A) of Cenvat Credit Rules, 2004.
2. Discrepancy in the amount of cenvat credit reversal between the appellant and the Department.
3. Applicability of penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act.

Analysis:

Issue 1: Appellants' liability to reverse cenvat credit under Rule 6(3A) of Cenvat Credit Rules, 2004

The main contention in this case was whether the appellants had properly reversed the cenvat credit irregularly availed as per Rule 6(3A). The appellant argued that they had reversed the credit based on the formula specified in the rule, while the Department disagreed. The Commissioner (Appeals) noted the lack of sufficient documents from the appellants to verify the reversal. However, the appellants provided detailed reversal information in the appeal memorandum. Eventually, the appellant agreed to reverse the ineligible credit and pay interest due to the delay in reversal. The Tribunal found that the appellant had reversed a specific amount for the disputed period, except for a sum of ?1,77,784, which they were liable to reverse along with interest. The Tribunal remanded the matter back to the original authority for verification.

Issue 2: Discrepancy in the amount of cenvat credit reversal between the appellant and the Department

There was a significant difference in the quantum of cenvat credit reversed by the appellants and that quantified by the Department, resulting in a show cause notice. The appellant contended that they had reversed the credit based on calculations by their CA, while the Department's computation differed. The Tribunal found that the appellant had reversed a substantial amount before the notice was issued, absolving them from penalty. The Department failed to prove any willful misrepresentation or suppression of facts by the appellant.

Issue 3: Applicability of penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act

The Tribunal ruled that since the appellant had reversed a significant portion of the credit before the show cause notice, they were not liable to pay a penalty. The Department did not provide evidence of suppression of material facts by the appellant. The Tribunal referred to various legal precedents to support its decision and concluded that the appellant was only required to reverse a specific amount along with interest, as computed by them.

In conclusion, the Tribunal allowed the appeal, subject to verification of the reversal of ineligible credit by the appellant. The appellants were not held liable for the penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act. The matter was remanded back to the original authority for further verification.

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