2015 (6) TMI 470 - AT - Central Excise

Tribunal overturns penalty under Central Excise Act, supports appellant's good faith actions.

M/s. Hikal Limited And Others Versus Commissioner of Central Excise & S.T., Surat And Others

M/s. Hikal Limited And Others Versus Commissioner of Central Excise & S.T., Surat And Others - 2015 (329) E.L.T. 901 (Tri. - Ahmd.) Issues:1. Availing CENVAT credit on the basis of incorrect documents.2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.3. Contesting the demand of CENVAT credit.Analysis:Issue 1: Availing CENVAT credit on the basis of incorrect documentsThe appellants were availing CENVAT credit on inputs based on the Original for Buyers copy instead of the required Duplicate for Transporter copy. This led to a discrepancy during a CERA audit, where it was noted that the appellants were not eligible to avail CENVAT credit. The appellants debited the amount in question and informed the Range Superintendent accordingly. The show cause notice was issued proposing a demand for CENVAT credit along with interest and penalty.Issue 2: Imposition of penalty under Section 11ACThe adjudicating authority confirmed the demand for CENVAT credit along with interest and imposed a penalty equal to the amount of the CENVAT credit under Section 11AC of the Central Excise Act, 1944. The Commissioner (Appeals) modified the order, granting a reduced penalty under Section 11AC. The appellant contested the demand of CENVAT credit, citing relevant Tribunal decisions that supported their position. The Revenue argued that the penalty was rightfully imposed as the appellant knowingly availed irregular CENVAT credit.Issue 3: Contesting the demand of CENVAT creditThe appellant argued that they contested the demand of CENVAT credit before the adjudicating authority, contrary to the Commissioner (Appeals)'s observation. The appellant had voluntarily reversed the CENVAT credit along with interest and requested the show cause notice to be dropped. The Tribunal found that the appellant had indeed paid the duty along with interest as per the amount ascertained by the audit, and thus the show cause notice could not be sustained. The Tribunal also disagreed with the lower authorities' findings that the appellant's actions were not a bonafide clerical error, citing relevant case laws supporting the appellant's position.In conclusion, the Tribunal set aside the penalty imposed under Section 11AC, allowing the appeal filed by the assessee and rejecting the appeal filed by the Revenue.