2013 (11) TMI 780 - AT - Central Excise

Interest and penalty on wrong availment of cenvat credit Appellant took SSI exemption benefit of Cenvat credit availed by mistake Duty along with interest and penalty demanded - Held that - The credit availed by the assessee was lying unutilized in their records and was immediately reversed on being pointed out by the Revenue Following UOI and Ors. Versus Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court and CCE & ST Bangalore vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT - In case the wrongly availed credit stand reversed without utilizing the same no interest would become liable to be paid the demand of interest set aside. The appellant have accepted that they had wrongly availed the credit but it was on account of inadvertent mistake and the fact that appellant continued to reflect the same in their statutory records i.e. Cenvat credit account as also in the quarterly return reflects upon the bonafide of the appellant - The fact of non-utilization of credit and reflection of the same in statutory records reflects upon absence of attempt and commitment causing any prejudice to the Revenue there is no occasion for imposition of penalty - the appellant was availing credit with due knowledge of the Revenue and was reflecting the same in the statutory records - there was no malafide on the part of the assessee for inviting any penal action against them Duty demand confirmed and the Penalty set aside Decided in favour of Assessee.

Summary

Issues:
1. Availment of Cenvat credit post opting for small scale exemption.
2. Initiation of proceedings for confirmation of reverse entry, interest, and penalty.
3. Reduction of demand by Commissioner (Appeals) and challenge of interest and penalty imposition.
4. Liability to pay interest and imposition of penalty for wrongly availed credit.
5. Bonafide nature of the mistake and absence of malafide intention.

Detailed Analysis:
Issue 1: The appellant, engaged in the manufacture of pharmaceutical products, inadvertently continued to avail the Cenvat credit of duty post opting for small scale exemption from 1.4.09. The Revenue raised objections regarding this inadvertent mistake, leading to proceedings for confirmation of reverse entry, interest, and penalty.

Issue 2: The Assistant Commissioner confirmed the demand for the reversed amount and appropriated it, which was challenged in the appeal before the Commissioner (Appeals). The Commissioner observed a short deposit and directed the appellant to pay the balance, while also confirming the interest and upholding the penalty, resulting in the present appeal.

Issue 3: The appellant clarified that there was no malafide intention in continuing to avail the credit post opting for small scale exemption. The advocate argued against the confirmation of interest and penalty, highlighting that the credit for the period in question was not utilized, and the mistake was purely clerical.

Issue 4: The Tribunal analyzed the liability to pay interest and imposition of penalty for wrongly availed credit. Citing legal precedents, including a Supreme Court decision and a Karnataka High Court case, it was held that if wrongly availed credit is reversed without utilization, no interest is payable. Accordingly, the confirmation of interest was set aside.

Issue 5: Regarding the imposition of penalties, the Tribunal considered the bonafide nature of the mistake and absence of malafide intention on the part of the appellant. Referring to a Tribunal case, it was noted that penal proceedings should demonstrate contumacious conduct causing prejudice to the Revenue, which was not the case here. As the appellant had reflected the mistake in statutory records without utilizing the credit, no penal action was warranted.

In conclusion, the Tribunal confirmed the demand of duty as debited in full, set aside the confirmation of interest, and imposition of penalties, based on the absence of malafide intent and the bonafide nature of the mistake made by the appellant.