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2017 (7) TMI 1135 - AT - Central ExciseCENVAT credit erroneously taken - Recovery u/s 11A of Central Excise Act, 1944 - amount under rule 6 (3) (i) of CCR 2004 not paid - demand of Interest and penalty - restriction of recovery on the ground that the SCN pertaining to incorrect availment of credit of tax paid on procurement of several services during certain months between April 2011 and February 2012 was not founded on facts - Held that - It is observed that the disputed amount pertain to the one service which the appellant had, upon notice, reversed the ineligible amount. Furthermore, it has also been established by them that the amounts of credit which had been taken is far less than the amount which was reversed - demand of interest set aside. Penalty u/s 11AC of CEA, 1944 - penalty imposed on the ground that the change in practice had not been intimated to the jurisdictional authorities - intention to Evade - Held that - It is an admitted fact, and accepted by the adjudicating authority, that the excess CENVAT credit of ₹ 3,76,071/- had been taken inadvertently. The show cause notice contains no evidence to support the allegation of intent to evade duty nor is there any finding to that effect in the adjudicating order - penalty do not sustain. Appeal allowed.
Issues:
Recovery of interest and penalty under sections 11A, 11AA, and 11AB of Central Excise Act, 1944 for incorrect availment of credit of tax paid on procurement of services under CENVAT Credit Rules, 2004. Analysis: 1. The appellant, M/s Parle Products Pvt Ltd, challenged the interest charged and penalty imposed in the order-in-original issued by the Commissioner of Central Excise, Mumbai-I. The order confirmed the recovery of a specific amount under section 11A of the Central Excise Act, 1944, along with interest under section 11AA and penalty under section 11AB. The show cause notice alleged non-payment of a substantial amount under rule 6 (3) (i) of CENVAT Credit Rules, 2004. 2. The adjudicating authority limited the recovery to a certain amount, stating that the allegation in the show cause notice regarding incorrect availment of credit of tax on services was not factual. The appellant had reversed the incorrect availment on certain services before the notice was issued. The authority also mentioned that compliance with rule 6(3)(i) of CENVAT Credit Rules, 2004 was unnecessary due to restrictions on credit utilization. 3. The dispute arose from the common input services used for manufacturing dutiable products like 'biscuits' and 'namkeens', which had separate accounting due to exemptions. The appellant was accused of availing full credit on common services without following the prescribed procedures, leading to an obligation to pay 5% of the value of exempted goods. 4. Upon reviewing the appellant's submissions, the authority accepted that credit was availed only for services attributable to dutiable products, negating the liability under rule 6(3)(i) of CENVAT Credit Rules, 2004. However, recovery of interest and penalty was ordered due to the erroneous credit availed and subsequently reversed. 5. The appellant's counsel argued that the reversed credit was done before the notice, and the credit utilization remained consistent even after excluding the erroneous part. It was contended that penalty and interest imposition was unjustified based on the diligent credit availing practices of the appellant. 6. The appellant demonstrated that the disputed amount was related to a single service for which the ineligible amount was promptly reversed upon notice. The total credit taken was less than the reversed amount, indicating no basis for charging interest on the corrected amount. 7. The penalty under section 11AC was imposed without evidence of intent to evade duty, as the excess credit was inadvertently taken. The absence of proof or findings supporting an intention to evade duty rendered the penalty unjustified, leading to the appeal's allowance by setting aside the penalty and interest. 8. The judgment concluded by pronouncing the decision in court, highlighting the successful appeal in overturning the penalty and interest charges.
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