2007 (6) TMI 582 - AT - Central Excise

Summary

The CESTAT Mumbai addressed an appeal challenging Order-in-Appeal No. PII/26/2006, which confirmed a duty demand of Rs. 15,000 but set aside penalties imposed on the respondent for improper Cenvat credit. The respondent had availed Cenvat credit on original invoices and sugar cess paid under the Sugar Cess Act, 1982. Revenue contended that credit on original invoices was improper and that credit on sugar cess was ineligible, seeking mandatory penalty under Section 11AC once the demand was confirmed.The Tribunal noted the respondent reversed the sugar cess credit before issuance of the show cause notice. Citing the Bombay High Court decision in Commissioner of Central Excise v. Gaurav Mercantiles Ltd. [2005 (190) E.L.T. 11 (Bom.)], the Tribunal held that erroneous credit due to misinterpretation, especially when reversed timely, does not warrant mandatory penalty under Section 11AC. The Tribunal affirmed the appellate order setting aside penalties and rejected the Revenue's appeal, emphasizing that penalty under Section 11AC is not automatic where the credit is reversed prior to notice and the error is not deliberate.