By TIOL News Service

MUMBAI, JULY 03, 2015: THE appellant is engaged in the manufacture of excisable goods (Ch. 87) and are availing CENVAT credit. It was observed that the appellant had fraudulently availed Cenvat Credit on invoices without receipt of goods.

On being pointed out by departmental officers, the appellant reversed the Credit of Rs.6.15 lakhs, but a SCN was issued for imposition of interest and penalty.

The adjudicating authority, apart from appropriating the amount paid,demanded interest and also imposed equivalent penalty.

This order was upheld by the lower appellate authority.

In appeal before CESTAT, the appellant submitted that the wrong availment of CENVAT Credit was due to fraud of an employee of the appellant; that the appellant has lodged a FIR against the said employee and issue is pending; that they have reversed credit but not paid the interest only for the reason that the Cenvat Credit wrongly availed, was not utilized; that the penalty is not to be imposed as there was no intention to avail wrong credit by the company.

The AR submitted that the fraudulent act of an employee, that too of a manager level, needs to be attributed to the appellant company and, therefore, penalty imposed is correct. While reiterating the findings of lower authority, reliance is placed on the decision of Allahabad High Court in the case of CCE V/s M/s Chaudharana Steel Pvt. Ltd. [2012-TIOL-38-HC-ALL-CX].

The Bench observed -

Interest:

At the outset, I would record that the interest liability needs to be discharged by the appellant as per Rule 14 of Cenvat Credit Rules, 2004. The liability arises even if the improperly availed Cenvat Credit is not utilized, as per law settled by the Supreme Court. Accordingly, I uphold the interest liability on the appellant and direct them to pay the same without 30 days, on being informed by lower authority or their own ascertainment.

Penalty:

I find that there is no dispute as to the fact, that the employee of the appellant company was involved in fraudulent act for his personal gain. The act of the individual employee in availing improper Cenvat Credit cannot be attributed to appellant as a mala-fide act, as the act of fraud admittedly is not authorized and can never be authorized by the management of the appellant company. In my considered view, equal penalty imposed is unwarranted.

Holding so, the equivalent penalty imposed on the appellant company was set aside.

The appeal was disposed of.

(See 2015-TIOL-1315-CESTAT-MUM)