By TIOL News Service

MUMBAI, JAN 07, 2014: THIS is a Revenue appeal.

The respondent procured capital goods in the year 2001-02. In the said year, they availed 50% of CENVAT Credit of duty paid capital goods. Remaining 50% credit was taken in the year 2002-03. The respondent again took 50% in 2003-04. Audit took place in the factory of the respondent and on pointing out by the audit party they reversed the CENVAT credit availed on the capital goods on 14.07.2003 on 31.10.2003 and interest was also paid on 03.11.2003.

A SCN was issued for imposition of penalty under Section 11AC of the CEA, 1944 r/w Rule 13 of the CCR, 2004.

Adjudication took place and the penalty was confirmed but, on appeal, the Commissioner (Appeals) dropped the penalty.

Revenue is aggrieved with this and is before the CESTAT.

The Revenue representative relied upon the Supreme Court decision in Union of India vs. Rajasthan Spinning & Weaving Mills 2009-TIOL-63-SC-CX and submitted that penalty is imposable u/s 11AC.

The respondent submitted that the credit was taken wrongly but on pointing out they immediately reversed the same and paid interest for the intervening period. Since the SCN was issued after 16 months invoking extended period and in the absence of mensrea the imposition of penalty is not sustainable.

The Bench observed -

"7. On perusal of the records, I find that in the show-cause notice in para (iii) it has been recorded that the noticee had intentionally taken wrong credit of duty on capital goods and utilized the same for payment of Central Excise duty. They did not reverse the said credit on their own accord but only after being pointing out by the departmental officers and hence they appear liable for penal action. On perusal of the said allegation in the show-cause notice, the credit has been taken intentionally and wrongly. Both are contrary terms. If the credit is taken intentionally then it cannot be taken wrongly but if it is mentioned wrongly then it cannot be intentionally. When the show-cause notice alleges two contrary terms against the respondent in that situation, benefit of doubts goes in favour of the respondent. As show-cause notice has not alleged the respondent clearly therefore I uphold the impugned order wherein penalty has been dropped against the respondent."

The Revenue appeal was dismissed.

In passing : English is a funny language; that explains why we park our car on the driveway and drive our car on the parkway - Anon

(See 2014-TIOL-31-CESTAT-MUM)