2023 (9) TMI 63 - AT - Central Excise

Tribunal overturns penalties for irregular CENVAT credit, emphasizing lack of evidence for suppression or misstatement.

The tribunal set aside penalties imposed on M/s. Nexteer Automotive India Pvt. Ltd. despite irregular CENVAT credit, as the credit was voluntarily ... Penalty - suppression of facts or not - Availment of Irregular Credit - HELD THAT:- It is necessary to prove either fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions with intention to evade payment of duty. Unfortunately, none of these ingredients have been invoked in the notices and the impugned order also does not provide any evidences except to state that that the irregular availment of cenvat credit came to light only at the time of audit. The present case is based only on the audit para and there is no iota of evidence to prove either suppression or misdeclaration of facts or contravention of provisions with intention to evade payment of duty. On the other hand, the appellant immediately reversed the credit as and when it was pointed out by the audit officers and the officers clearly noted that interest and penalty are not to be levied. Inspite of these notices were issued after nearly 2 years after the audit observations and reversal of credit. The Hon’ble Karnataka High Court in the case of COMMR. OF C. EX., BANGALORE-I VERSUS GENEVA FINE PUNCH ENCLOSURES LTD. [2011 (1) TMI 746 - KARNATAKA HIGH COURT] where the order of the Tribunal held not to impose penalty, was upheld by the Hon’ble High Court of Karnataka. There are no merit either in the show-cause notices or in the impugned order - appeal allowed. Issues Involved:1. Imposition of penalty despite the reversal of irregular CENVAT credit.2. Applicability of Section 11A(4) and 11A(5) of the Central Excise Act, 1944.3. Allegations of suppression, misstatement, or contravention of provisions for evasion of duty.Summary:Imposition of Penalty Despite Reversal of Irregular CENVAT Credit:M/s. Nexteer Automotive India Pvt. Ltd., the appellants, had availed irregular credit, which was reversed on 30.01.2014. The audit report dated 09.04.2014 noted that no interest and penalty were charged as the appellant had maintained sufficient balance in their CENVAT account. However, show-cause notices were issued later, and penalties were imposed by the Original Authority, which were upheld by the Commissioner (A) in the impugned order dated 30.08.2022.Applicability of Section 11A(4) and 11A(5) of the Central Excise Act, 1944:The appellant argued that the audit report had clearly mentioned that no interest and penalty were warranted, and the Commissioner (A) had also observed that the credit was reversed before the issuance of show-cause notices. The appellant relied on precedents like Landis + Gyr Ltd. vs. Commissioner of Central Excise, Kolkata-V and Commr. of Central Excise, Bangalore-I vs. Geneva Fine Punch Enclosures Ltd., which held that penalties are not justified if the credit was reversed voluntarily and no suppression or misstatement was proven.The Revenue argued, citing Section 11A(5), that the appellant was liable to pay 50% of the penalty. They also referred to judgments like Alstom Projects India Ltd. vs. Commissioner of Customs and Commissioner of Central Excise, Allahabad vs. NIBI Steel Ltd., supporting the imposition of penalties for irregular credit.Allegations of Suppression, Misstatement, or Contravention of Provisions for Evasion of Duty:The tribunal found that the notices and the impugned order did not provide evidence of fraud, collusion, wilful misstatement, or suppression of facts. The appellant had reversed the credit immediately upon being pointed out by the audit officers, who noted that interest and penalty were not to be levied. The tribunal referred to the case of Landis+GYR Ltd. vs. Commissioner of Central Excise Kolkata-V, which emphasized that audit observations alone cannot justify penalties without evidence of suppression or misstatement.Conclusion:The tribunal concluded that the provisions of Section 11A(2B) were applicable, which state that if duty is paid voluntarily before the service of notice, no penalty should be imposed. The tribunal also referred to the Karnataka High Court's decision in Commissioner of Central Excise Bangalore-I vs. Geneva Fine Punch Enclosures Ltd., which held that no penalty is warranted if duty and interest are paid voluntarily without any intent to evade.The tribunal found no merit in the show-cause notices or the impugned order and set aside the order, allowing the appeal.(Order pronounced in open court on 31/08/2023.)