2024 (12) TMI 1239 - AT - Central Excise

Recovery of the excess availed credit along with interest and for imposing penalty - breach of Rules 4 and 9 of the Cenvat Credit Rules 2004 (CCR 2004) - suppression of facts or not - extended period of limitation - HELD THAT - This is a case where the appellant had irregularly availed CENVAT credit by taking double credit on the same invoice and also by taking credit over and above what is specified in the invoice input. They had thus breached Rules 4 and 9 of the Cenvat Credit Rules 2004 (CCR 2004) and had committed a blame worthy act. The excess credit was recoverable under Rule 14 of CCR 2004. Interest and penalty - HELD THAT - The appellant has reversed the credit even before issue of SCN and had sufficient credit balance and had not utilised such credit for payment of duty as verified and stated by the Ld. Adjudicating Authority in the OIO. In such circumstances no interest was payable by them as per the ratio of the Hon ble Karnataka High Court judgment in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX LARGE TAXPAYER UNIT, BANGALORE VERSUS M/S BILL FORGE PVT LTD, BANGALORE 2011 (4) TMI 969 - KARNATAKA HIGH COURT - Considering that the unit is a public sector unit and that the excess credit was not availed a lenient view is called for. In the facts and circumstances of the case, the interest demanded and the fine imposed is set aside. Extended period of limitation - HELD THAT - It is settled law that to invoke willful suppression, fraud etc, there must be some positive act which betrays a negative intention of willful default from the side of the assessee to establish a charge of suppression, fraud etc. and not merely an error made. No such act has been shown in the impugned order. The impugned order is modified on the above terms and the interest and penalty set aside - Appeal allowed.

Summary

Issues:
Irregular availing of CENVAT credit, imposition of penalty, applicability of Rule 15(2) of CENVAT Credit Rules, 2004, interpretation of Section 11AC(1)(b) of the Central Excise Act, 1944, liability to pay interest, invocation of extended period for recovery, consideration of willful suppression or fraud.

Analysis:

The appeal before the Appellate Tribunal CESTAT Chennai involved the irregular availing of CENVAT credit by a manufacturer of steel products. The appellant had taken double credit on the same invoice and exceeded the specified credit limit on input invoices during a specific period. The Original Authority dropped the penalty proposed in the Show Cause Notice, citing the appellant's sufficient credit balance and lack of intention to evade duty payment due to being a public sector undertaking. However, the Commissioner (Appeals) allowed the department's appeal and imposed a reduced penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 and Section 11AC(1)(b) of the Central Excise Act, 1944.

The appellant contended that the conditions specified in Section 11AC must be met to apply the extended period for recovery, such as fraud or willful misstatement, which were not proven by the department. They argued against the imposition of interest as they had a sufficient credit balance, referencing a judgment of the Karnataka High Court. The appellant sought the setting aside of the impugned order.

The Appellate Tribunal noted that the appellant had irregularly availed CENVAT credit, breaching Rules 4 and 9 of the CENVAT Credit Rules, 2004. However, the appellant had reversed the excess credit before the issuance of the Show Cause Notice and had not utilized it for duty payment, as confirmed by the Adjudicating Authority. Citing the Karnataka High Court judgment, the Tribunal held that no interest was payable when there was no liability to pay duty. The Tribunal emphasized that willful suppression or fraud must be positively established, which was not done in this case. The order accepted that the excess credit was taken inadvertently, and considering the appellant's status as a public sector unit, a lenient view was warranted. Consequently, the Tribunal set aside the interest and penalty imposed in the impugned order.

In conclusion, the impugned order was modified, setting aside the interest and penalty. The appellant was granted consequential relief as per law, and the appeal was allowed and disposed of accordingly.