2018 (7) TMI 525 - AT - Central Excise

Tribunal reverses penalty under Central Excise Act; voluntary credit reversal deemed sufficient

The Tribunal set aside the penalty imposed on the appellant under section 11AC of the Central Excise Act for failure to reverse cenvat credit attributable ... Penalty u/s 11AC of CEA read with Rule 15(2) of the CCR 2004 - CENVAT credit - input used in the manufacture of exempted goods as well as dutiable goods - appellant have reversed the proportionate cenvat credit attributable to manufacture of cotton yarn on being pointed out - Held that:- On pointing out by the Audit, they reversed the cenvat credit attributable to inputs namely, coal used in the manufacture of exempted goods. Therefore, there was no requirement to issue show cause notice to the appellant in terms of Section 11A(2) of the Central Excise Act, 1944 - no penalty is imposable on appellant - appeal allowed. Issues: Appeal against imposition of penalty under section 11AC of the Central Excise Act read with Rule 15(2) of the Cenvat Credit Rules, 2004.The judgment dealt with an appeal against the imposition of a penalty on the appellant under section 11AC of the Central Excise Act read with Rule 15(2) of the Cenvat Credit Rules, 2004. The appellant, a manufacturer of blended yarn and cotton yarn, availed cenvat credit on coal used in the manufacture of both exempted and dutiable goods. Upon audit, it was discovered that the appellant had not reversed the proportionate cenvat credit attributable to the manufacture of cotton yarn, which was exempt from duty. Subsequently, upon notification by the department, the appellant reversed the cenvat credit. The appellant later realized that the amount reversed was insufficient and rectified the balance credit as well. A show cause notice was issued, leading to the imposition of a penalty. The appellant contended that since they had voluntarily reversed the cenvat credit upon audit notification, there was no need for a show cause notice under Section 11A(2) of the Central Excise Act, 1944. The Tribunal considered this argument and concluded that no penalty was warranted in this case. Consequently, the penalty imposed on the appellant was set aside, while the rest of the demand was confirmed. The appeal was disposed of accordingly.