The Hyderabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that penalty cannot be imposed for mere wrong apportionment of CENVAT Credit between two units as it is just a clerical error.
The appellants, Synthokem Labs Pvt. Ltd. are engaged in the manufacture of bulk drugs and are availing the CENVAT Credit on inputs, capital goods and input services. They are simultaneously utilising the same for payment of duty on their final products. During the course of Audit of records of the appellant, the Audit officers noticed that the appellants had short paid the service tax and had erroneously availed the CENVAT credit.
The issue raised was the case in hand was merely a case of wrong apportionment of credit between the appellants both units, a bonafide clerical error or it was a case of intentional malafide intention to evade payment of duty.
The coram of Judicial Member, Rachna Gupta noted that though the amount was not proportionately bifurcated between both the units of the appellants but simultaneously it is an admitted fact that the amount of Rs. 2,54,199/- was not further distributed to the second unit of the appellant despite being claimed by the first unit. So the eligibility of claim of credit of Rs. 8,28,621/- stand admitted.
The tribunal held that there has been no evasion but only an error between the two units of the appellant for availing the credit without bifurcating the same inter se. However, deficiency was made good even before the issue of impugned show cause notice and the credit were properly being recorded in their returns at the time of taking the same and also at the time of reversing the same. Once those have been properly recorded in the books of accounts of the appellants, the allegation of intentional evasion remains only assumption having no legs to stand upon.
“When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. Above all, suppression of facts is clearly qualified by word wilful in the section. Hence, presence of mensrea to evade duty has to be there. From the facts as discussed above since there has been prompt reversal by the appellant that too of a such amount which was meant for the appellants own both units, however was utilised only by one unit. Hence allegation of wilful mis- statement with an intent to evade payment rather not at all justified. Though the adjudicating authority below had been right while dropping the demand on the same ground by holding it to be mere clerical error, they have definitely got wrong while still imposing penalty. The order accordingly is hereby set aside,” the CESTAT ruled.
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