2022 (12) TMI 349 - AT - Central Excise

Levy of equal amount of penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act - appellant have not utilised the amount of credit as is evident from their cenvat record and is reversed - HELD THAT - The appellant did not contest the amount of Rs.2,07,598/- from the very beginning and have reversed the same and also deposited 15% penalty as early on 07.04.2016, which is almost one year prior to issuance of show cause notice. Further, it is evident that the said amount remained unutilised till the date of reversal. It has also been held by the Hon ble Supreme Court in the case of CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR 1995 (12) TMI 72 - SUPREME COURT , that where any cenvat credit has been reversed without utilisation of the same, amounts to credit having not been taken at all. Accordingly, appellant is not liable for interest penalty for this amount. The disputed amount of Rs. 2,07,598/- stood concluded in terms of Section 11AC(1)(d) of the Central Excise Act. Accordingly, no show cause notice should have been issued to this amount. Therefore, the penalty imposed under Section 11AC is set aside alongwith demand of interest. Appeal allowed.

Summary

Issues:
Imposition of equal penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act.

Analysis:
The appellant, a manufacturer of automobiles, availed cenvat credit on various items, including Chapati Making Machine and Hydroponic structure. During a departmental audit, an objection was raised regarding the inadmissibility of a total credit of Rs.17,89,714, out of which the appellant accepted an error in availing credit for Rs.2,07,598. Consequently, the appellant reversed this amount and deposited a 15% penalty of Rs.31,140. Subsequently, a show cause notice was issued proposing to disallow the total credit amount, including the Rs.2,07,598, which was already reversed by the appellant. The matter had been remanded for denovo adjudication, resulting in the reconfirmation of the total credit along with an equal penalty and interest by the Assistant Commissioner.

The appellant appealed against the imposition of the penalty. The appellant's counsel argued that the appellant had not contested the Rs.2,07,598 amount from the beginning, had reversed it, and paid the penalty under Section 11AC. They contended that as per Section 11A(1)(c), if duty demanded and interest paid within thirty days of the show cause notice, the penalty should be 15% of the duty demanded, which had been complied with. The appellant claimed that since the amount was not utilized, no interest was payable on it, and all proceedings should be deemed concluded.

The Revenue's representative relied on the findings of the Commissioner (Appeals) in support of the penalty imposition. However, upon considering the contentions, the Tribunal found that the appellant had not contested the Rs.2,07,598 amount, had reversed it, and paid the penalty almost a year before the show cause notice was issued. The Tribunal referred to a Supreme Court case to establish that if cenvat credit is reversed without utilization, it amounts to credit not being taken at all. Therefore, the Tribunal held that the appellant was not liable for interest and penalty on this amount. Consequently, the penalty imposed under Section 11AC was set aside, along with the demand for interest.

In conclusion, the appeal was allowed with consequential relief, and the penalty under Section 11AC was deemed not applicable to the disputed amount of Rs.2,07,598.