Penalty for Premature Cenvat Credit Set Aside

The Appellate Tribunal CESTAT NEW DELHI set aside the penalty imposed on the appellant for prematurely availing Cenvat credit without making payment for input services. The Tribunal found that there was no mala fide intent as the credit was not utilized and the closing balance always exceeded the credit availed. Despite the contravention of rules, the Tribunal deemed the penalty unjust due to the lack of wrongful intent, ultimately ruling in favor of the appellant on 21-10-2016.

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Issues: Imposition of penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 for premature availment of Cenvat credit without making payment for input services.

In this judgment, the Appellate Tribunal CESTAT NEW DELHI addressed the challenge to the penalty of &8377; 73,559 imposed on the appellant for availing Cenvat credit without first making payment for input services. The appellant admitted to the premature availment but claimed it was an inadvertent mistake without any mala fide intention, highlighting that the credit was not utilized and the closing balance was always higher than the credit availed. The appellant argued that since interest was paid for the premature availment, imposing a penalty would be unjust. The Tribunal noted that while the appellant contravened Rule 4(7) of the Cenvat Credit Rules, 2004 by not making payment before availing credit, there was no dispute regarding their entitlement to the credit. The Tribunal recognized the time gap as the only issue, with the credit being entered in the accounts before actual payment. As the credit was not utilized prematurely and there was no mala fide intent, the Tribunal held that the penalty was unwarranted. Consequently, the Tribunal set aside the penalty imposed, allowing the appeal in favor of the appellant. The judgment was pronounced on 21-10-2016 by Ms. Archana Wadhwa, Member (J) of the Tribunal.

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