2008 (10) TMI 490 - AT - Central Excise

Appeal Dismissed: Timely Reversal of Cenvat Credit

The Tribunal dismissed the appeal, upholding the decision that penalty was not applicable in this case due to the timely reversal of the Cenvat credit by ... Penalty - Reversal of ineligible Cenvat/Modvat credit before SCN Issues:1. Dispute over imposition of penalty under Central Excise Act.2. Interpretation of Notification No. 8/2003-CE regarding exemptions for small scale industrial units.Analysis:1. The dispute in the appeal was centered around the imposition of a penalty by the Revenue. The adjudicating authority had confirmed a demand of Rs. 2,58,729/- along with interest, and imposed a penalty of an equal amount as per Rule 11AC of the Central Excise Act. The respondent did not contest the demand but challenged the penalty. The Commissioner (Appeals) held that since the respondent had paid the duty with interest before the show cause notice was issued, penalty was not applicable. This decision was based on precedents like CCE, Delhi-III v. Machino Montell and Rashtriya Ispat Nigam Ltd. The Revenue appealed this decision.2. The second issue arose from Notification No. 8/2003-CE, which provided exemptions to small scale industrial units subject to certain conditions. One such condition was the reversal of Cenvat credit accumulated as of 31-3-2003. The respondents were entitled to this credit until 31-3-2003, and they should have reversed it when opting for the exemption. However, they only reversed the credit on 15-4-2003 after an audit revealed the irregularity on 8-4-2003. The respondent claimed that they were unable to reverse the credit earlier due to unavailability of records. The Tribunal opined that since the credit was reversed before the show cause notice was issued, it was not appropriate to interfere with the appellate authority's decision to not impose a penalty on the respondent.In conclusion, the Tribunal dismissed the appeal, upholding the decision that penalty was not applicable in this case due to the timely reversal of the Cenvat credit by the respondent before the issuance of the show cause notice.