2021 (12) TMI 1108 - AT - Central Excise

CENVAT Credit - part of opening balance of Cenvat credit relatable to the receipt of capital goods in the previous year - whether (being made partial amount) disallowance for ₹ 2,83,137/- have been rightly made alongwith imposition of equal penalty? - HELD THAT - There is no discrepancy and the whole confusion has occurred on account of clerical error in the account/store section of the appellant who initially submitted the figures to the audit, wherein this amount of ₹ 2,83,137/- was left out erroneously. Thus, it is found that the show cause notice is misconceived and there is no merit in the allegation of Revenue. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Whether the disallowance of Cenvat credit relating to capital goods in the opening balance was rightly made along with the imposition of an equal penalty.

Detailed Analysis:

1. Issue of Cenvat Credit Disallowance:
The appellant availed Cenvat credit on inputs and capital goods, following the provisions of Rule 4(2)(a) which allows credit for capital goods received in a factory to be taken up to 50% in the same financial year. The remaining 50% credit is available in the next or immediately succeeding financial year. The appellant took credit of deferred Cenvat credit amounting to &8377; 70,16,535 in April 2016 for capital goods received in the previous financial year. However, during an audit, it was found that there was an excess credit of &8377; 2,83,137 which was not supported by invoices as required by Rule 9 of CCR.

2. Explanation and Response by the Appellant:
The appellant explained that the discrepancy was due to a clerical error by their office clerk who did not include the amount attributable to additional duty and special additional duty in the submission to the audit. They maintained that there was no actual discrepancy and provided a detailed schedule of entries showing the voucher-wise purchase of capital goods and the deferred credit amount. Despite the explanation, the Revenue issued a show cause notice demanding the amount under Rule 14 of CCR with a proposal for a penalty.

3. Adjudication and Appeal:
The show cause notice was contested, and the demand along with the penalty was confirmed. The appellant then appealed to the Commissioner (Appeals), who upheld the decision. Subsequently, the appellant approached the Tribunal challenging the decision.

4. Tribunal's Decision:
After considering the arguments, the Tribunal found that the confusion arose due to a clerical error in the appellant's accounting records. The Tribunal concluded that there was no actual discrepancy in the availed Cenvat credit and that the show cause notice was misconceived. Therefore, the appeal was allowed, the impugned order was set aside, and the appellant was entitled to consequential benefits as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that the alleged discrepancy in Cenvat credit was a result of a clerical error and not a deliberate attempt to avail excess credit. The judgment highlights the importance of maintaining accurate records and the need for thorough verification before imposing penalties based on audit findings.