Custom, Excise & Service Tax Tribunal
Andhra Cements Ltd vs Commissioner Of Central Excise, ... on 25 July, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 21250 / 2014 Application(s) Involved: E/MISC/307/2011, E/MISC/542/2011 in E/551/2007-SM Appeal(s) Involved: E/551/2007-SM [Arising out of Order-in-Appeal No. 194/2006 dated 15/03/2007 passed by the Commissioner of Central Excise and Customs, Visakhapatnam] Andhra Cements Ltd. Porlupalem Village, Durgap Nagar Post, Visakhapatnam Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax Visakhapatnam-I Central Excise Building Port Area Visakhapatnam - 530 035 Andhra Pradesh Respondent(s)
Appearance:
Mr. P.V.B. Chary, Advocate 7-1-216/4, Adj: Kushboo Silkshow Room, Balkampet, Hyderabad - 16 For the Appellant Mr. Ganesh Haavanur, AR For the Respondent CORAM:
HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER Date of Hearing: 25/07/2014 Date of Decision: 25/07/2014 Order Per: B.S.V. MURTHY Since the synopsis submitted by the learned counsel covers the arguments advanced before me the same is reproduced below:
SYNOPSIS
1) In the appeal the issues are the following vide Order-in-Appeal of the Commissioner (Appeals).
(i) Demand of Rs. 44,78,549/- under Section 11A of CEA, 1944. Read with Rule 3(3) of the CENVAT Credit Rules.
(ii) Penalty of Rs. 10 lakhs reduced by the Commissioner.
(iii) Interest held as payable on irregular utilization of a credit of Rs. 44,78,549/-
2) The period of dispute was from October, 2003 to April, 2004.
3) The dispute is in regard to utilization of CENVAT credit earned for subsequent months for discharge of duty liability under Rule 8 of Central Excise Rules, 2002. The credits taken and used are detailed here
(i) Credit earned in October, 2003 used for discharging part of liability of September, 2003 ..Rs. 22,06,621/-
(ii) Credit earned in December, 2003 used for
discharging part liability of November, 2003 ..Rs. 14,00,077/-
(iii) Credit earned in April, 2004 used for discharging
part liability of March, 2004 ..Rs. 8,71,851/-
Total Credit Rs. 44,78,549/-
4) The appellant company was a sick company registered under Board for Industrial and Financial Reconstruction ((BIFR) vide case No. 33/90. They had struggled very hard to sustain themselves during the material period and later. There were defaults in payment of duties. In respect of clearances made for the months of September, 2003, November, 2003 and March, 2004, the credits earned during the subsequent months were utilized. Since the credit accrued later was utilized for clearances made for the earlier period, the appellants had paid back the entire credit amounting to Rs. 44,78,549- in PLA (by cash) before the hearing of stay petition and took the credit (which was reversed earlier) by restoring it into balance of credit account.
5) The respondent Commissioner objected to re-taking of credit (even though the payment was paid in PLA) and filed a miscellaneous petition for dismissal of appeal (E/Misc/298/2008). The range Superintendent also directed the appellant to pay interest on the defaulted amount. Therefore the appellant had to file Misc. Petition No. 307/2011 for granting stay on recovery on interest and another Misc. Petition No. E/542/2011 along with affidavit of Sri A.K. Aggarwal, Asst. Vice President (Finance & Accounts) explaining the circumstances under which the defaults had occurred and how the imposition of penalty and interest are not warranted in view of the revival package sanctioned by Board for the Industrial and Financial Reconstruction vide its order dated 25.07.2008 under the provisions of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 vide page 31 (v) clause of the BIFR order.
6) The Honble Tribunal vide Misc. Order Nos. 642 & 643/2011 dated 28.11.2011 dismissed the miscellaneous application filed by Revenue for dismissal of appeal and allowed the application filed by appellants for staying the operation of demand of interest on duty subject to deposit of Rs. 1 lakh towards penalty. In this regard kind observations of the Honble Tribunal (while dismissing the Misc. Petition of Revenue) in regard to the fact of payment of the disputed credit by cash and taking credit back into account are respectfully adverted to.
7) In regard to the two miscellaneous applications filed by appellants along with affidavit explaining the facts on the conduct of the appellant, the Honble Tribunal observed that the petitions would be disposed of while hearing the appeal. It is humbly submitted that in the taking of credit for subsequent utilization no offence was committed since the credit got restored by cash payment in PLA.
8) It is submitted that the impugned period is from October, 2003 to September, 2004. The amount of credit wrongfully used was paid back by cash and since the wrongfully used credit was paid back into PLA, the amount would be entitled to be taken into credit suo motu as an accounting treatment. The Honble Tribunal in quite a few cases held taking of credit suo motu in such circumstances is no offence under CENVAT provisions or under Rule 8 of Central Excise Rules, 2002. The following are two such cases decided by Honble Tribunal.
2007 (211) E.L.T. 27 (Tri.-Chennai) Plasweave Pvt. Limited Vs. Commissioner of C. Ex., Tirunelveli Demand Removal of goods on discharging duty liability by debiting credit from Cenvat accounts which was earned subsequent to impugned clearances Interest paid for delay in accrual of credit utilized Demands in cash sustainable and assessee directed to pay duty amounts in PLA On such payment of duty, assessee be entitled for Cenvat credit to corresponding extent in their Cenvat accounts Equal amount of penalty imposed, is too harsh in view of peculiar facts of case Penalty reduced Sections 11A and 11AC of Central Excise Act, 1944.
2008 (231) E.L.T. 349 (Tri.-Del.) Nehru Steels Vs. CCE, Kanpur Payment of duty from Cenvat a/c without having sufficient balance Cenvat/Modvat Assessee not eligible for availing Cenvat credit for payment of duty during relevant period - Directed to pay duty from PLA and thereupon be eligible for Cenvat credit to corresponding amount in Cenvat account Rule 8 of Central Excise Rules, 2002.
9) The Honble High Court at Chennai had also held so in the following case that such process involves only account entry reversal and that suo motu credit can be taken.
2014 (302) E.L.T. 45 (Mad.) ICMC Corporation Ltd.
Vs. CESTAT, Chennai Cenvat - Recredit - Suo motu credit of Cenvat reversed earlier Process involved only an account entry reversal, no outflow of funds from the assessee Filing of refund claim under Section 11B of Central Excise Act, 1944 not required Rule 6(5) of Cenvat Credit Rules, 2004
10) It is therefore evident that since the demand of Rs. 44,78,549/- as confirmed by Commissioner (Appeals) stands paid, (as explained supra) before hearing of stay petition in respect of the order in appeal, the penalty of Rs. 10 lakhs and the interest ordered are the only two items under dispute as on date.
11) It is respectfully submitted that the period in dispute is October, 2003 to April, 2004. The appellants were under BIFR scheme. The scheme was finalized by BIFR by BIFR order dated 25.07.2008 as stated supra. By that order interest and penalty are not leviable for defaults arising during that period vide page 31 clause (v) of the BIFR order. In this connection, it is submitted that in respect of proceedings initiated earlier in the similar case of Dachepalli factory of the appellants, this Honble Bench in Final Order Nos. 140 and 141/2009, had been pleased to consider the approved scheme of BIFR and accordingly had been pleased to set aside penalty and interest on the company. Copy of final order is appended to the Miscellaneous petition. Another copy is submitted herewith. In that order kind reference is solicited to concluding paragraph 5.6.
12. I have considered the submissions made by the learned counsel. Learned AR reiterated the arguments that there was a default on the part of the appellant and the default was made good subsequently and therefore consequences have to be taken by the appellant.
13. In this case the default occurred during the year 2003-04. During the relevant period there was no statutory provision specifically providing that the CENVAT credit should not be used during the default period. Logically, the CENVAT credit which came into the account in a subsequent month could not have been used for demand of duty for the previous month since the inputs could not have been used for the production of previous month. However it is settled law that once the CENVAT credit is availed and entered in the books, it may be used for payment of duty on the output and there is no one to one correlation required. Further the Tribunal also has been taking a consistent view that for making pre-deposit of duty, CENVAT credit can be used. Naturally when CENVAT credit is used for making the pre-deposit, such credit may not be relating to the period in which the output had been produced. When there is no one to one correlation between the output and the input for the purpose of utilization of CENVAT credit and in the absence of specific provision denying the utilization of CENVAT credit during the default period, in case of default by the appellant in monthly payment, utilization of CENVAT credit during the next month for payment of duty relating to the previous month cannot be faulted with. Needless to say the interest is liable to be paid and appellants have apparently paid the interest for delayed payment next month. At best it can be said that availment of CENVAT credit in the subsequent month is a procedural violation since strictly going by the law, credit could not have been used. In any case in my opinion in the absence of specific provisions similar to Rule 8(3) of Central Excise Rules prohibiting an assessee from utilizing the CENVAT credit and also in view of the fact that in this case the default never went beyond one month, stand taken by the Revenue that the entire amount has to be paid in cash and till the payment was made in cash, interest is liable to be paid is not correct. I also take note of the fact that even in terms of provisions of Rule 8(3), only when the default is more than one month, the prohibition of utilization of cenvat credit would arise. In this case on all the three occasions, the duty was paid in the next month and therefore the default does not appear to have travelled beyond one month.
14. Having regard to all these facts and circumstances, I do not consider that interest is payable by the appellant. As regards penalty, there is no doubt that there is a default in making payment on monthly basis. Further the benefit of BIFR decision also in my opinion is not applicable to the assessee. This is because while BIFR had allowed them to pay the principal in installment over a period of 7 years and had waived interest and penalty, the appellants have chosen to pay the entire amount and take the CENVAT credit back in 2008 itself. Therefore appellants themselves have not availed the benefit extended by BIFR which apparently is due to the fact that by that time BIFR passed the order extending the benefit, the financial position of the appellant had improved and they were in a position to pay the amount. Similarly for payment of interest also, no waiver was available. Since the appellants have not availed the order of the BIFR as regards principal, obvious conclusion is that there was no need for the same. The principal and interest and statutory liability and the same crystallised in the year 2008 and the same was discharged. Therefore I do not think that the benefit of waiver of penalty in terms of BIFR order can be extended to the appellant.
15. In view of the above, I consider that while interest is not liable to be paid, for not following the principles of law appellant is liable to penalty. However I consider that penalty of Rs. 10,00,000/- (Rupees Ten lakhs only) imposed in the impugned order is harsh and requires to be reduced. Accordingly penalty is reduced to Rs. 1,00,000/- (Rupees One lakh only). Appeal is decided in above terms.
(Operative portion of the order has been pronounced in open court on 25.07.2014) (B.S.V. MURTHY) TECHNICAL MEMBER iss