Utilisation of CENVAT Credit of Excise duty of Defaulted period without any wilful avoidance: CESTAT Quashes penalty u/s 11AC of Central Excise Act [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed under section 11AC of the Central Excise Act,1944 for utilizing the CENVAT Credit of Excise duty of defaulted period without any wilful avoidance. 

Kalp Corporation, the appellant assessee appealed against the order passed by the Commissioner (Appeals) for imposing the penalty under Section 11AC of the CentralExcise Act, 1944, Rule 25 and Rule 27 of Central Excise Rules, 2002, and Rule 15(2) of CENVAT Credit Rules, 2004 for the defaulted payment of excise duty. 

P.P. Jadeja, the counsel for the assessee contended that this was a case of a delayed payment of admitted liability of monthly excise duty, therefore, there was no malafide and the appellant has never denied the liability and subsequently, paid the duty, therefore, no penalty can be imposed under any of the Section and Rules. 

Also submitted that in the case of Indsur Global v.Union of India, the court held that the assessee utilized the CENVAT credit for payment of duty during the default period. 

R.K. Agarwal, the counsel for the department relied on the decisions made by the lower authorities and contended that the penalty imposed by the revenue was as per the law and liable to be sustained. 

The Bench observed that the ingredients provided under the proviso to section 11A of the Central Excise Act for invoking suppression, fraud misdeclaration, etc. do not exist in this case, and as per Rule 8 of Central Excise Rules regarding monthly payment of duty, there is no specific provision for imposition of penalty. 

There was only a requirement of payment of interest in case of delay and the utilization of CENVAT credit for payment of duty during the default period, the same has been held in favor of the assessee in the Indsur Global Limited case. 

The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) held that penalties under Section 11AC of the Act, Rule 25 of Central Excise Rules, and Rule 15(2) of CENVAT Credit Rules are not sustainable and liable to be deleted while allowing the appeal filed by the assessee. 

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