2011 (8) TMI 33 - AT - Central Excise

Appellant's Challenge on Penalty Under Section 11AC Overturned

The judgment upheld the demand for cenvat credit and interest, as the appellant did not challenge these aspects. However, the penalty under Section 11AC ... Interest on wrongly availed CENVAT credit where credit was not utilised prior to reversal - penalty under Section 11AC of the Central Excise Act, 1944 - admissibility of CENVAT credit on MS angles, channels, beams and platesInterest on wrongly availed CENVAT credit where credit was not utilised prior to reversal - Interest is payable on CENVAT credit wrongly availed and not utilised prior to reversal. - HELD THAT: - The Tribunal applied the legal position settled by the Hon'ble Supreme Court in M/s. Ind-Swift Laboratories Limited, as noted by the parties, and held that interest is chargeable where wrongly availed credit was not utilised before reversal. The appellant conceded this point and did not contest the demand for interest. [Paras 3]Demand for interest on the wrongly availed CENVAT credit is upheld.Penalty under Section 11AC of the Central Excise Act, 1944 - admissibility of CENVAT credit on MS angles, channels, beams and plates - Penalty under Section 11AC cannot be sustained and is set aside. - HELD THAT: - The Tribunal found that there existed earlier decisions of the Tribunal taking the view that CENVAT credit was admissible on items such as MS angles, channels, beams and plates. In those circumstances the appellant could not be said to have suppressed facts or made false declarations with intent to evade duty. On this basis the imposition of penalty under Section 11AC was held to be unsustainable. [Paras 4, 6]Penalty imposed under Section 11AC is set aside.Final Conclusion: The demand for CENVAT credit and interest thereon is upheld as not contested; the penalty imposed under Section 11AC is quashed and the appeal is disposed accordingly. Issues:1. Admissibility of cenvat credit on certain goods under Chapter 72 of the Central Excise Tariff Act, 1985.2. Liability for interest on wrongly availed cenvat credit.3. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.Admissibility of Cenvat Credit:The appellant, engaged in manufacturing articles under Chapter 72, availed cenvat credit for goods like MS Angles, Channels, Plates, Beams, etc. The department contended that treating these goods as capital goods for credit was inadmissible. The appellant, after agreeing with the audit findings, paid back the cenvat credit with interest. Subsequently, a show cause notice was issued, leading to the impugned order stating that interest is chargeable when wrongly availed credit is not utilized before reversal. The appellant did not contest the reversal of credit and interest, citing a Supreme Court decision supporting the liability for interest on wrongly taken credit.Liability for Interest:The Hon'ble Supreme Court decision in the case of M/s. Ind-Swift Laboratories Limited established that interest is payable on wrongly taken cenvat credit that has not been utilized. The appellant acknowledged this position, leading to the acceptance of interest liability.Imposition of Penalty:Regarding the penalty under Section 11AC, the appellant argued that various Tribunal decisions supported the admissibility of cenvat credit on items like MS Angles, Channels, Beams, Plates, etc., until the matter was clarified. Citing precedents like Ispat Industries Limited vs. CCE Mumbai and others, it was argued that there was no intention to evade duty, as there was no suppression of facts. Consequently, the penalty under Section 11AC was deemed unsustainable. The Tribunal upheld the demand for cenvat credit and interest, as the appellant did not contest it, while setting aside the penalty imposed.In conclusion, the judgment upheld the demand for cenvat credit and interest, as the appellant did not challenge these aspects. However, the penalty under Section 11AC was overturned based on the Tribunal's view that there was no intent to evade duty due to the existence of precedents supporting the admissibility of cenvat credit on the disputed goods.