Pharma Co. wins appeal over CENVAT credit error, avoids penalty under Cenvat Credit Rules.

The appellant, a pharmaceutical manufacturer, inadvertently availed CENVAT Credit twice on the same Bill of Entry. Upon acknowledgment of the error, the excess credit was repaid with interest. The department issued a show-cause notice proposing a penalty under Rule 15(2) of Cenvat Credit Rules, 2004. The Tribunal ruled in favor of the appellant, citing timely payment of duty and interest before the notice was issued, entitling them to benefit under Section 11A(2B) of the Central Excise Act. The impugned order was set aside, and the appeal was allowed with consequential benefits.

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Issues:
1. Availment of CENVAT Credit twice on the same Bill of Entry.
2. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act.
3. Applicability of Section 11A(2B) in the case of short payment of duty.

Analysis:

Issue 1: Availment of CENVAT Credit twice on the same Bill of Entry
The appellant, engaged in manufacturing pharmaceutical products, availed credit of duty paid on inputs, capital goods, and input services under the Cenvat Credit Rules, 2004. An audit revealed that the appellant had availed CENVAT Credit twice on the same Bill of Entry, amounting to Rs. 2,83,072. Upon notification by the department, the appellant acknowledged the error and repaid the excess credit with interest. The department issued a show-cause notice proposing to appropriate the amount paid and impose a penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act.

Issue 2: Imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004
The show-cause notice led to an Order-in-Original confirming the demand, interest, and imposing a penalty equal to the excess credit availed. The appellant appealed to the Commissioner (Appeals), who upheld the decision. The appellant contended that the double credit was a bona fide mistake, promptly rectified upon notification by the Revenue. The appellant argued for the benefit under Section 11A(2B), which allows payment of duty with interest before the issuance of a notice, barring cases of fraud or collusion.

Issue 3: Applicability of Section 11A(2B) in case of short payment of duty
The Tribunal found no evidence of fraudulent conduct by the appellant and noted that the duty and interest were paid before the show-cause notice was issued, entitling the appellant to the benefit under Section 11A(2B) of the Central Excise Act. As the notice was served more than 18 months after the payment, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with any consequential benefits.

This judgment highlights the importance of timely rectification of errors, the applicability of relevant sections for duty payment, and the need for clear allegations in show-cause notices to establish misconduct.

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