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CX – In absence of any confirmation of demand, penalty imposed cannot withstand the scrutiny of law: CESTAT

2019-TIOL-2346-CESTAT-HYD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, HYDERABAD
SINGLE MEMBER BENCH
COURT NO. I

Appeal No. E/30694/2018

Arising out of Order-in-Appeal No. GUN-EXCUS-000-APP-146-17-18, Dated: 26.12.2017
Passed by CCT & C (Appeals), Guntur

Date of Hearing: 05.03.2019
Date of Decision: 05.03.2019

HARSHINI POLY FILMS

Vs

CCT, GUNTUR GST

Appellant Rep by: None
Respondent Rep by: Shri P S Reddy, Dy. Commissioner AR

CORAM: M V Ravindran, Member (J)

CX – Appellant availed cenvat credit of CE duty paid on capital goods during 2012-13 and also claimed depreciation on the amount of CE duty and filed returns with the income tax authorities stating so – SCN issued – demand dropped for reversal of cenvat credit as also for interest, however, equivalent amount of penalty imposed.

HELD: Appellant filed revised income tax returns with the authorities writing back the depreciation claimed – this would amount to non-availment of depreciation and in accordance of provisions of Cenvat Credit Rules, 2004 [CCR] – the adjudicating authority has taken a conscious note of this and dropped the demand alongwith interest, recording so, very clearly – if that be the case, the question of imposition of any penalty on the appellant does not arise as provisions of Rule 15 (2) of CCR presupposes the demand of duty or irregular availment of cenvat credit – in the absence of any confirmation of demand, penalty imposed by the lower authorities cannot withstand the scrutiny of law – the impugned order is set aside and the appeal is allowed holding that penalty is set aside : CESTAT [para 7, 8]

Appeal allowed

FINAL ORDER NO. A/30309/2019

Per: M V Ravindran:

1. This appeal is directed against Order-in-Appeal No. GUN-EXCUS- 000-APP-146-17-18, dated 26.12.2017.

2. None appeared on behalf of the appellant assessee despite notice.

3. On perusal of records, I find that the matter is in a narrow compass, therefore the appeal is taken up for disposal even in the absence of any representation from the appellant assessee.

4. On perusal of records, it transpires that the issue is regarding the challenge of the assessee appellant on the penalty imposed by the adjudicating authority and upheld by the first appellate authority.

5. The appellant, as per the orders passed by the lower authorities, had availed CENVAT Credit of Central Excise duty paid on capital goods during the year 2012-13 and also claimed depreciation on the amount of central excise duty and filed returns with the income tax authorities stating so. During the course of audit, this was noticed and appellant was asked to explain the matter. The appellant entered into correspondence with the Department stating that they have filed revised income tax returns writing back the depreciation availed by them. Show cause notice was issued on the appellant of such CENVAT Credit utilised by the appellant, seeking for interest and proposing for penalty. Appellant contested the show cause notice. The adjudicating authority, after following the principles of law, dropped the demands raised for the reversal of CENVAT Credit as also for the interest by recording that the appellant has revised the income tax returns and wrote back the depreciation claim on the amount of central excise duty, but he imposed equivalent amount of penalty on the appellant under the provisions of Rule 15(2) of CENVAT Credit Rules 2004 read with Section 11 AC of Central Excise Act, 1944. Aggrieved by such imposition of penalty, an appeal was preferred to the first appellate authority, who upheld the order of adjudicating authority. Hence this appeal.

6. Learned Departmental Representative argues that but for the audit by the department, this issue would have gone unnoticed and the adjudicating authority has given relief of no demand on the duty by recording that appellant has written back the depreciation claim by filing income tax returns. He submits that such provision of Rule 15 (2) of CCR 2004 are very clear and the penalty imposed is correct and should be upheld.

7. On careful consideration of the submissions made by Learned Departmental Representative and perusal of records, I find that there is no dispute as to the fact that the appellant had availed the CENVAT Credit on the duty paid on capital goods and also claimed depreciation from the income tax authorities, however, he filed revised income tax returns with the authorities, writing back the depreciation claimed. In my view, this would amount to non availment of depreciation as per and in accordance of provisions of CENVAT Credit 2004. Further, I find that the adjudicating authority has taken a conscious note of this and dropped the demand alongwith interest, recording so, very clearly. If that be the case, in my view, the question of imposition of any penalty on the appellant does not arise as provisions of Rule 15 (2) of CENVAT Credit Rules 2004 pre supposes the demand of duty or irregular availment of CENVAT Credit. In the absence of any confirmation of demand, penalty imposed by the lower authorities cannot withstand the scrutiny of law. Accordingly, I hold that the appellant has made out the case in his favour on the imposition of penalty.

8. The impugned order is set aside and the appeal is allowed holding that penalty is set aside.

(Pronounced in open court on 05.03.2019)

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