Tribunal rules appellant not liable for penalty under Rule 15(2) for credit error

The Appellate Tribunal CESTAT Ahmedabad ruled that the appellant was not liable for penalty under Rule 15(2) for availing 100% credit instead of 50% for capital goods. The tribunal found that the appellant had rectified the error by reversing the excess credit and paying interest, with no malafide intent. Consequently, the penalty was deemed inapplicable, and the appeal was allowed in favor of the appellant.

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Issues:
Whether the appellant is liable for penalty under Rule 15(2) for availing 100% credit instead of 50% for capital goods.

Analysis:
The judgment by the Hon'ble Member (Judicial) Mr. Ramesh Nair of the Appellate Tribunal CESTAT Ahmedabad delves into the issue of penalty imposition on the appellant for availing 100% credit instead of the mandated 50% for capital goods. The appellant, as pointed out by the department, had reversed the excess credit of 50% along with interest. The appellant's counsel argued that there was no wrongful availment of credit, rather an inadvertent lapse in taking the entire credit upfront instead of splitting it as required. The counsel contended that this lapse should only attract interest, which the appellant had already paid. The appellant relied on various judgments to support their case.

On the other hand, the Authorized Representative for the revenue reiterated the findings of the impugned order. After considering the submissions from both sides and examining the records, the Hon'ble Member found that the appellant had acknowledged the excess credit availed and rectified the error by reversing the credit and paying the interest. The Member observed that there was no malafide intent on the part of the appellant, as they were eligible for the remaining 50% credit in the subsequent financial year. The Member concluded that the lapse was inadvertent and not indicative of any intention to evade duty or fraudulently avail Cenvat credit, thus falling under the purview of Section 11A(2B) of the Central Excise Act, 1944.

Based on the above analysis, the Hon'ble Member ruled that since there was no malafide intent on the part of the appellant, the penalty was not imposable. Consequently, the penalty was set aside, and the appeal was allowed in favor of the appellant. The judgment was pronounced in open court on 01.12.2022.

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