Tribunal overturns penalty for disputed Cenvat Credit, citing lack of fraud. Appellant's compliance recognized.

The Tribunal set aside the penalty imposed on the appellant for availing Cenvat Credit on capital goods during a disputed period, as there was no evidence of fraud or collusion. The appellant voluntarily reversed the credit and paid interest upon audit findings, showing compliance with the Cenvat statute. The Tribunal found that obtaining registration at the initial plant setup was not a prerequisite for availing the credit. Consequently, the penalty imposed under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944, was deemed unjustified, and the appellant's appeal was allowed.

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Issues:
Imposition of penalty under Rule 15 (2) of Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944.

Analysis:
The appellant, engaged in the manufacture of Compressed Natural Gas (CNG), availed Cenvat Credit on capital goods during a disputed period. The department disputed this credit, claiming that the godowns where the goods were received were not registered with the Central Excise department at the time of availing the credit. Upon audit findings, the appellant voluntarily reversed the credit and paid interest before the issuance of the show-cause notice. The department then initiated proceedings seeking denial of credit, interest payment, and imposition of penalty. The adjudicated order confirmed a Cenvat demand against the appellant, along with interest and an equal amount of penalty under Rule 15 (2) of the Rules read with Section 11AC of the Act.

The appellant argued that availing the credit was in compliance with the Cenvat statute as there was no specific requirement to obtain registration before availing credit. They contended that there was no element of fraud, collusion, or willful misstatement in availing the credit, as the reversal and interest payment were done voluntarily upon the audit objection. The appellant challenged the imposition of penalty, claiming it was unjustified.

After considering both sides and examining the case records, the Tribunal found that the appellant had availed credit upon receiving duty paid goods in the godown, and obtaining registration at the initial plant setup was not a prerequisite for availing Cenvat benefit. Since the appellant voluntarily reversed the credit and paid interest upon audit discovery, and there was no evidence of fraud or collusion, the Tribunal concluded that the penalty imposed was not justified under the law. Therefore, the penalty imposed in the impugned order was set aside, and the appeal filed by the appellant was allowed with consequential benefits as per law.

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