2022 (12) TMI 522 - AT - Central Excise

Levy of penalty under Rule 15(2) - charge that appellant have availed 100% credit instead of 50% and remaining 50% to be availed in the next Financial year in respect of capital goods - malafide intent or not - HELD THAT - The appellant has not disputed the excess availment of credit of 50% in advance. However, admitting the same lapse they have reversed the credit and also paid the interest. There is no mala fide can be attributed towards the appellant for this lapse as the appellant is otherwise eligible for Cenvat credit of remaining 50% within a short time i.e. in the next financial year. Therefore, this lapse is inadvertent and cannot be said that there is any intention to evade duty or fraudulent availment of Cenvat credit. In this fact the case should have been concluded, on the basis of appellant s reversal of excess credit of 50% along with payment of interest thereon which could have resulted into non issuance of SCN and consequently no penalty should have been imposed. Therefore, in this fact since there is no mala fide on the part of the appellant, the case is clearly covered by Section 11A(2B). The penalty is not imposable on the appellant - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is liable for penalty under Rule 15(2) for availing 100% credit instead of 50% for capital goods.

Analysis:
The judgment by the Hon'ble Member (Judicial) Mr. Ramesh Nair of the Appellate Tribunal CESTAT Ahmedabad delves into the issue of penalty imposition on the appellant for availing 100% credit instead of the mandated 50% for capital goods. The appellant, as pointed out by the department, had reversed the excess credit of 50% along with interest. The appellant's counsel argued that there was no wrongful availment of credit, rather an inadvertent lapse in taking the entire credit upfront instead of splitting it as required. The counsel contended that this lapse should only attract interest, which the appellant had already paid. The appellant relied on various judgments to support their case.

On the other hand, the Authorized Representative for the revenue reiterated the findings of the impugned order. After considering the submissions from both sides and examining the records, the Hon'ble Member found that the appellant had acknowledged the excess credit availed and rectified the error by reversing the credit and paying the interest. The Member observed that there was no malafide intent on the part of the appellant, as they were eligible for the remaining 50% credit in the subsequent financial year. The Member concluded that the lapse was inadvertent and not indicative of any intention to evade duty or fraudulently avail Cenvat credit, thus falling under the purview of Section 11A(2B) of the Central Excise Act, 1944.

Based on the above analysis, the Hon'ble Member ruled that since there was no malafide intent on the part of the appellant, the penalty was not imposable. Consequently, the penalty was set aside, and the appeal was allowed in favor of the appellant. The judgment was pronounced in open court on 01.12.2022.