Interest is payable on taking of credit. There is no requirement of mesa rea for imposition of Penalty under Rule 15 of CCR,2004.

PJ/Case Laws/2012-13/1243

Case:- Commissioner of Central Excise, Jaipur-I versus Videocon Industries Ltd.

Citation:- 2012(279) E.L.T. 438 (Tri-Del)

Brief Facts:- The respondents are manufacturers of refrigerators chargeable to Central Excise duty. They avail Cenvat credit of duty paid on inputs used in or in relation to manufacture of their finished products. They availed Cenvat credit on the basis of certain invoices twice, which on being pointed out by the audit was reversed. Subsequently show cause notice issued to them for confirmation of Cenvat credit demand and also for demand of interest on wrongly taken credit and imposition of penalty. The Assistant Commissioner was demanded interest on the same under Rule 14 Cenvat Credit Rules, 2004 read with Section 11AB of Central Excise Act and imposed penalty on them under Rule 15 of Cenvat Credit Rules. On appeal being filed before the Commissioner (Appeals) by the respondent, the Commission (Appeals) by the impugned order-in-appeal, while upholding the Cenvat credit demand, set aside the interest and penalty. Against this portion of the order, the Commissioner (Appeals), the present appeal has been filed by the Revenue.

Appellant’s Contention:- The Appellant pleaded that the question of interest for the period of wrong availment of Cenvat credit is concerned, the issue stands decided in favour of the respondent by the judgment of Hon'ble Supreme Court in the case of Union of India v. Ind-Swift Laboratories Ltd. that since this is a case of wrong availment of Cenvat credit, penalty under Rule 15(1) would also be attracted, as from the wordings of Rule 15(1) of Cenvat Credit Rules, 2004 it is clear that the penalty is attracted for wrong availment of Cenvat credit and for this purpose, no mens rea is required to be proved. He, therefore, pleaded that the impugned order setting aside the interest and penalty is not correct. I have carefully considered the submissions of the learned DR and perused the records.

Reasoning of Judgement:- In this case, none representing the respondent appeared. There is also no letter from them seeking adjournment. There is no dispute about the wrong availment of Cenvat credit, which had been availed on the basis of the same invoices twice and on being pointed out; the excess credit taken had also reversed. The dispute is only as to whether the respondent are liable to pay interest for the period, they had availed the wrong Cenvat credit and also whether they are liable for penalty under Rule 15(1) of Cenvat Credit Rules, 2004. So far as the question of interest for the period of wrong availment of the Cenvat credit, the same stands decided in favour of the department by the judgment of Hon'ble Supreme Court in the case of U01 v. Ind-Swift Laboratories Ltd. (supra), and, hence, the Commissioner (Appeals)'s order setting aside the interest is not correct and the same is liable to be set aside. The imposition of penalty for wrong availment under Rule 15(1) of Cenvat Credit Rules, no mens rea is required to be proved and penalty is attracted whenever Cenvat credit is availed wrongly. It is only for imposition of penalty equal to the wrongly availed Cenvat credit under The provisions of sub-rule (2) of Rule 15 read with Section 11AC of the Central Excise Act, 1944, that the mens rea is required to be proved. In view of this, the impugned order setting aside the penalty on the respondent is not correct and is liable to be set aside. However, looking to the circumstances of this case, the imposition of penalty equal to the Cenvat credit demand would not be justified and the same has to be reduced.
In view of the above discussion, the Commissioner (Appeals)'s order setting aside the interest and penalty is set aside and in this regard, the order passed by the original Adjudicating Authority is restored. However, looking to the circumstances of this case, penalty under Rule 15(1) of Cenvat Credit Rules, 2004 is reduced to Rs. 20,000/-. Revenue's appeal stands disposed of, as above.

Decision:- Appeal Disposed off.

Comment:- Although the credit has been reversed by the appellant voluntarily yet the interest and penalty is payable. The Apex Court has decided on interest that the same is payable even on taking of credit though the same is not utilized. Although the department has amended the rule and it is now clear that the interest is payable on utilization only i.e. when the harm is caused to the department. But it does not have retrospective effect.

Secondly, the important point in this case, penalty under Rule 15 does not require mensa rea for imposition of penalty. This requirement is only for penalty under Section11AC.

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PJ/Case Laws/2012-13/1243

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