The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has observed that a penalty under the Excise Act is not leviable when duty to proportionate CENVAT credit of exempted goods paid. Further held that since the appellant has paid the amount of 60,15,116/- which is proportionate Cenvat credit attributed to the exempted goods belatedly, they are liable to pay the interest till the date of reversal.
Lyka Labs Limited, the Appellant-Assessee is engaged in the manufacture of dutiable goods and also exempted goods under Notification No. 04/2006-CE dated 01.03.2006. They are availing the Cenvat credit in respect of input and input services which are utilized for dutiable as well as exempted goods. During the period December 2008 to November 2013 they cleared excisable goods value at Rs. 85,19,57,086/- at nil rate of duty. They have not followed the procedure as laid down under Rule 6 (3) (1)/(2)/3A of Cenvat Credit Rules, 2004 nor have they reversed any credit utilized for the manufacture of exempted goods.
A show cause notice was issued to the appellant demanding Rs. 4,89,41,107/- which is equal to 5% or 6% of the value of the exempted goods. The Adjudicating Authority considering the submission of the appellant reduced the demand to Rs.60,15,116/- which is equal to the proportionate Cenvat credit on the input and input services attributable to the exempted goods. However, the demand of interest was also confirmed and an equal amount of penalty was also imposed.
The Appellant-Assessee submitted that even though the demand is prima facie time bar the appellant has admittedly paid the amount of proportionate credit of input and input services attributed to the exempted goods. Therefore, the penalty should not be imposed. He submitted that it is settled law that on reversal of proportionate credit, no demand under Rule 6 (3) equal to 5% or 6% of the value of the exempted goods is sustainable.
A two-member bench comprising Mr Ramesh Nair, Member ( Judicial ) And Mr C L Mahar, Member ( Technical ) that the appellant has a strong prima facie case on time bar, despite that the appellant has paid the proportionate credit of Rs. 60,15,116/- and despite the demand being time bar they are not contesting the payment of Rs. 60,15,116/- but they are only seeking a lenient view as regard imposition of equal penalty.
The appellant has admittedly paid the amount of Rs. 60,15,116/- and they are only contesting the penalty. The Tribunal held that though the demand is prima facie time bar since the appellant has admittedly paid and not contesting such payment, the demand to the extent of Rs. 60,15,116/- is upheld and payment made thereof by the appellant is maintained. However, the appellant is not liable for any penalty.
The CESTAT set aside the penalty and held that since the appellant has paid the amount of 60,15,116/- which is proportionate Cenvat credit attributed to the exempted goods belatedly, they are liable to pay the interest till the date of reversal. Therefore the impugned order is modified to the above extent.
Shri Shailesh P. Sheth appeared for the Appellant-Assessee and Shri S.S. Vikal, Assistant Commissioner appeared for the Respondent-Revenue.
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