Appellate tribunal overturns penalty for mistaken CENVAT credit, finding no evidence of suppression or misdeclaration.

The appellate tribunal set aside the penalty imposed under Section 11AC of CEA,1944 on the appellant for mistakenly availing CENVAT Credit on dutiable and exempted inputs. The tribunal found that the appellant rectified the mistake by paying the outstanding amount upon notification by the Department, without evidence of suppression or misdeclaration. As there was no proof of facts warranting the penalty, it was deemed unsustainable, and the impugned Order-in-Appeal was overturned to the extent of confirming the penalty. The appeal was disposed of accordingly.

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Issues:
Imposition of penalty under Section 11AC of CEA,1944 without contesting duty and interest before the Ld. Commissioner (Appeals) and challenging penalty only.

Analysis:
The appeal was filed against Order-in-Appeal No.37/Kol-VII/2011 dated-22/02/2011, where the Ld. Commissioner (Appeals) confirmed the penalty under Section 11AC of CEA,1944. The appellant did not contest the duty and interest before the Ld. Commissioner (Appeals) and only challenged the penalty. The Ld. Consultant argued that they challenged the impugned order on both merits and against the penalty. The Revenue opposed this, stating that since the appellant did not dispute the case on merit before the Ld. Commissioner (Appeals), they cannot raise the issue before the appellate forum. The record of the personal hearing before the Ld. Commissioner (Appeals) revealed that the appellant did not contest the appeal on merit but only contested the imposition of penalty. Therefore, challenging the demand and interest at this stage was deemed impermissible.

On the issue of penalty, the appellant mistakenly availed CENVAT Credit on dutiable and exempted inputs, resulting in non-reversal of CENVAT Credit when opting out of the MODVAT Scheme. The appellant paid the outstanding amount along with interest upon realizing the mistake. The appellant argued that the penalty under Section 11AC of CEA,1944 was unwarranted due to the voluntary payment after the mistake was pointed out. The Revenue reiterated the findings of the Ld. Commissioner (Appeals). The appellate tribunal found that the appellant rectified the mistake by paying the outstanding amount upon notification by the Department, without any evidence of suppression or misdeclaration. The tribunal concluded that the penalty imposed was unsustainable as there was no evidence of suppression of facts warranting the penalty. The impugned Order-in-Appeal was set aside to the extent of confirming the penalty, and the appeal was disposed of accordingly.

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