2012 (8) TMI 857 - AT - Central Excise

Tribunal upholds cenvat credit demand, cancels penalty for prompt error rectification.

The Tribunal upheld the confirmation of the demand for the wrongly availed cenvat credit with interest but set aside the penalty imposed on the appellant. ... CENVAT credit - Wrong availment of CENVAT Credit - Goods received from 100% EOU - Held that:- there is no dispute as regards the amount of cenvat credit wrongly taken but only penalty issue has to be decided. As submitted by the ld. C.A., this Tribunal in the decision of Welkin Polymers (P) Ltd. [2010 (1) TMI 465 - CESTAT NEW DELHI] has taken a view that in such cases it cannot be said that there was suppression or mis-statement on the part of the assessee to avail cenvat credit wrongly. Moreover as soon as the omission was pointed out, the appellants have voluntarily debited the cenvat credit with interest without waiting for any proceedings to be initiated - liability for the cenvat credit incorrectly availed is not being questioned and the confirmation is also not being challenged. In view of the above discussion, while upholding the confirmation of the demand for wrongly availed cenvat credit with interest, the penalty imposed on the appellant is set aside - Decided partly in favour of assessee. Issues involved: Incorrect availing of cenvat credit from 100% EOU, imposition of penalty under Rule 15 read with Section 11AC of Central Excise Act, 1944.Analysis:The judgment by Mr. B.S.V. Murthy of the Appellate Tribunal CESTAT AHMEDABAD dealt with the issue of incorrect availing of cenvat credit by the appellant in respect of goods received from a 100% EOU. The appellants had availed full credit instead of following the correct formula. Upon being informed of the error, the appellants voluntarily debited the amount without waiting for a show cause notice. Subsequently, proceedings were initiated to confirm the demand for the incorrectly availed amount and to impose a penalty under Rule 15 read with Section 11AC of the Central Excise Act, 1944. The ld. C.A. representing the appellant acknowledged the error in availing the cenvat credit and the subsequent debiting of the amount with interest. He relied on a previous Tribunal decision to argue that in such cases where the error was rectified voluntarily, suppression could not be established, and hence, the penalty should not have been imposed.During the hearing, both sides agreed to address the penalty issue directly since there was no dispute regarding the incorrect availing of cenvat credit. The Tribunal considered the previous decision cited by the ld. C.A., which concluded that in cases where the error was rectified promptly upon discovery, it could not be deemed as suppression or misstatement by the assessee. The appellants had rectified the error by debiting the cenvat credit with interest immediately after it was pointed out, without waiting for any formal proceedings to be initiated. The ld. C.A. emphasized that while the liability for the incorrectly availed cenvat credit was acknowledged, and the confirmation of the demand was not being challenged, the penalty imposition was unwarranted. Consequently, the Tribunal upheld the confirmation of the demand for the wrongly availed cenvat credit with interest but set aside the penalty imposed on the appellant.In conclusion, the judgment clarified that in cases where an assessee rectifies an error promptly upon discovery without waiting for formal proceedings, the imposition of penalty may not be justified even if there was incorrect availing of cenvat credit. The decision highlighted the importance of voluntary rectification and the absence of suppression or misstatement in such situations.