Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S Kay Bouvei Engineering Pvt. Ltd on 22 August, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. I
Appeal No. E/3178/04
Application No. E/COD/455/00 in E/CO/15/09
(Arising out of Order-in-Appeal No. P-II/BKS/274/04 dated 28.6.2004 passed by the Commissioner of Central Excise (Appeals), Pune-II).
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== Commissioner of Central Excise, Pune-II Appellant Vs. M/s Kay Bouvei Engineering Pvt. Ltd. Respondent Appearance: Shri B.S. Meena, Addl. Commissioner (AR) for Appellant Shri S. Narayanan, Advocate for Respondent CORAM: SHRI P.R. CHANDRASEKHARAN, MEMBER (TECHNICAL) SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 22.08.2013 Date of Decision: 22.08.2013 ORDER NO. Per: P.R. Chandrasekharan
The Revenue is in appeal against Order-in-Appeal No. P-II/BKS/274/04 dated 28.6.2004 passed by the Commissioner of Central Excise (Appeals), Pune-II.
2. The COD application seeks to condone a delay of about four years in filing the cross-objection. The reason stated is misplacing of the file by the dealing official. The explanation given is highly unsatisfactory. Accordingly, the COD application is dismissed. Consequently, the Cross Objection also stand dismissed.
3. The facts relevant to the case are as follows: -
The respondent, M/s Kay Bouvei Engineering Pvt. Ltd. took CENVAT Credit of CVD amounting to Rs.30,56,260/- in respect of goods imported vide Bill of Entry No. 00478 dated 9.7.2001 without receipt of the goods in their factory. However, in the Gate Register maintained at the factory, entries were made showing the receipt of the goods on 30.6.2001. The goods were imported on 20.7.2001 and the consignment left Mumbai on 21.7.2001 to their customer M/s Dhanlaxmi SSK Niyamit, Belgaum as per the container transport consignment note dated 21.7.2001. However, the appellant took credit of CVD paid on the said imported goods on 31.10.2001. The Preventive Staff of the jurisdictional Central Excise Division visited the respondents factory on 30.7.2001 and during the scrutiny of the records, it was revealed that the appellant has taken a credit on imported goods, which was actually not received in their factory. Shri Narendra Kumar Choudhary, Authorized Signatory and Shri Kishor Pandurang Dange, Accountant of the respondent firm admitted these facts and stated that M/s Dhanlaxmi SSK Niyamit, Belgaum had placed order on the respondent for a sugar mill plant and the machinery required for the said plant was imported by the respondent from Sweden and the same was sent directly to the customer. However, they took credit of CVD paid on the said machinery. Thereafter, they reversed the credit on 27.12.2001. A show-cause notice was issued to the appellant proposing to appropriate the credit wrongly availed, which was subsequently reversed along with the interest thereon under Section 11A read with Section 11AB of the Central Excise Act, 1944 and also proposing to impose penalties under Section 11AC ibid. The said notice was adjudicated vide order dated 30.1.2004, wherein the inadmissible credit taken amounting to Rs.30,56,260/- was disallowed and the said amount reversed on 27.12.2001 was ordered to be appropriated. Interest was also confirmed on the said amount under the provisions of Section 11AB of the Central Excise Act, 1944 and equivalent amount of penalty was imposed on the respondent under Rule 13(2) of the Cenvat Credit Rules, 2001 read with Section 11AC of the Central Excise Act. The respondent preferred an appeal before the lower appellate authority, who vide the impugned order held that inasmuch as the entire credit has been reversed before issuance of the show-cause notice, interest under Section 11AB and penalty under Section 11AC are not sustainable and accordingly, he set aside the same. Aggrieved of the same, the Revenue is before us.
4. In the appeal filed by the Revenue, it has been urged that in the present case, the respondent had resorted to fraud by taking credit without receipt of the goods into the factory and also by manipulating the private records such as Gate Register to show receipt. Therefore, the provisions of Section 11A(2B), which provides for non-issue of show-cause notice in a case where the duty liability has been discharged would not apply. Therefore, the respondent is liable to pay interest and also penalty as provided for in the law. The learned Addl. Commissioner (AR) appearing for the Revenue reiterates the grounds urged in the appeal memorandum. He further submits that the appellant had resorted to manipulation in books of accounts by making false entries in the Gate Register even prior to clearance of the goods from the customs. It is also on record that the appellant had not received the goods into the factory but directly consigned the same to M/s Dhanlaxmi SSK Niyamit, Belgaum. Further, from the statements of the Authorized Signatory and the Accountant of the respondent firm, it is clear that the machinery was imported not for use by the appellant, but was meant for Dhanlaxmi SSK, who had placed the order for the goods on the respondent. Fully knowing well that the goods were not meant for respondents use and the goods were not received in the respondents factory, the respondent still availed the CENVAT Credit of the CVD paid on the imported goods. This conduct on part of the appellant clearly reveals their mala fide intention to avail ineligible credit and therefore, the provisions of Section 11A(2B) would not apply in such circumstances. He also relies on the decision of the Hon'ble Punjab & Haryana High Court in the case of Commissioner of Central Excise, Delhi-III Vs. Machino Montell (I) Ltd. 2006 (202) ELT 398 (P&H), wherein it has been held that mere discharge of duty liability prior to issue of show-cause notice would not lead to non-imposition of interest and penal liabilities if such action was on account of fraud, collusion or any willful mis-statement or suppression of facts with an intent to evade payment of duty. He further relies on the decision of Hon'ble Apex Court in the case of Ind-Swift Laboratories Ltd. 2011 (265) ELT 3 (SC), wherein it has been held that there is no difference between taking of CENVAT Credit or utilization of credit and if credit is taken wrongly, interest liability would attract from the date of taking of credit till such time it is reversed. Therefore, in the present case, the non-utilization of credit by the respondent would not obliterate the liability to pay interest on the wrong taking of credit. Accordingly, he pleads for setting aside the impugned order and restoring the order of the original authority.
5. The learned Counsel for the respondent submits that this is a case of irregular taking of credit. Inasmuch as the appellant has not utilized the credit, no loss has been caused to exchequer and therefore, penal liability would not attract. He relies on the decisions in the case of Steelco Gujarat Ltd. Vs. UOI 2012 (285) ELT 161 (Bom), CCE, Meerut-II Vs. Rana Sugar Ltd. 2010 (253) ELT 366 (All), Kesarwani Zarda Bhandar 2013 (289) ELT 331 (Tri-Del), Bombay Dyeing & Mfg. Co. Ltd. 2007 (215) ELT 3 (SC) and Bill Forge Pvt. Ltd. 2012 (279) ELT 209 (Kar.). However, the learned Counsel concedes that the appellant is liable to pay interest and his contention is only in respect of imposition of penalty.
6. We have carefully considered the submissions made by both sides.
6.1 Section 11A(2B) reads as follows: -
Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise officer before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid.
Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.
Explanation 1. Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty.
Explanation 2. For the removal of doubts, it is hereby declared that the interest under Section 11AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the Central Excise Officer, but for this sub-section.
[Explanation 3. For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of duty under this sub-section and interest thereon). A plain reading of the above section clearly shows that where duty has not been levied or paid or has been short-levied or short-paid by reason of fraud or collusion or any willful misstatement or suppression of facts, then the provisions of Section 11A(2B) will not apply.
6.2 In the present case, manipulation of the Gate Register by the respondent, consignment of goods directly to M/s Dhanlaxmi SSK Niyamit, Belgaum without bringing the same into the factory and the fact that the goods were never meant for use in the respondents factory and was meant for supply to M/s Dhanlaxmi SSK and the statements given by the authorized signatory and the Accountant of the respondent firm clearly evidence the fact that the appellant, knowing fully well that they are not eligible to take the credit, has taken ineligible credit deliberately. If the department had not investigated the matter, this wrong availment of credit would have gone unnoticed. It is only after pointing out by the department, the respondent has reversed the credit that of without paying any interest thereon. The entire conduct of the respondent clearly shows a guilty mind and intent to evade duty by manipulation of books of account and also by taking ineligible credit. Therefore, Explanation to Section 11A(2B) comes to play and hence, the reversal of credit by the respondent would not help the case at all and the respondent is liable for the interest liability as well as the penal consequences.
6.3 As regards the reliance placed by the respondent in the case of Steelco Gujarat (supra), the issue before the Hon'ble Bombay High Court was eligibility to DFIA Scheme under the Foreign Trade Policy when the credit is reversed. The said decision in no way deals with interest and penal liability under the Central Excise Act or the Cenvat Credit Rules; therefore, the said decision would not apply to the facts of the present case. As regards the decision of Hon'ble High Court of Allahabad in the case of Rana Sugar (supra), the said decision was passed before the Hon'ble Apex Court decision in the case of Ind-Swift Laboratories Ltd. was pronounced. The decision of the Hon'ble High Court of Allahabad is contrary to the decision of the Hon'ble Apex Court in the case of Ind-Swift Laboratories Ltd. (supra). Therefore, the same cannot be relied upon as decision of the Hon'ble Apex Court would prevail over the decision of the High Court. With regard to the decision of this Tribunal in the case of Kesarwani Zarda Bhandar (supra), this decision is a Single Member Bench decision, which is not binding on us. Secondly, the said decision does not take into account the decision of the Hon'ble High Court of Punjab & Haryana in the case of Machino Montell (supra), where in an identical circumstances, the Hon'ble High Court of Punjab & Haryana had held that penal consequence would follow in case fraud, collusion or willful mis-statement or suppression of facts are involved. Therefore, the said decision is also not applicable to the facts of the present case.
6.4 As regards the Hon'ble High Court of Karnatakas decision in the case of Bill Forge Pvt. Ltd. (supra), the said decision dealt with circumstances where the credit was taken wrongly and the reversal was done during the same month before the liability to pay duty arose. In that context, the Hon'ble High Court held that since the liability to pay duty did not arise, therefore, reversal of credit would not attract interest liability. In the present case, the credit was taken in the month of October and reversal was done in the Month of December. Therefore, the liability to pay duty would have arisen atleast for two months. Therefore, the ratio of Hon'ble High Court of Karnataka in the case of Bill Forge Pvt. Ltd. (supra) would not apply to the facts of the present case.
6.5 As regards the decision of the Hon'ble Apex Court in the case of Bombay Dyeing & Mfg. Co. Ltd., the issue before the apex Court was whether exemption can be granted under Notification No. 14/02 when credit taken was reversed and the condition of exemption was non-availment of credit. The Hon'ble Apex Court held that reversal of credit would amount to non-taking of credit for the purpose of satisfying the condition of exemption. The said decision did not in any way deal with a case where, credit was taken wrongly with an intent to evade excise duty. Therefore, the decision of the Hon'ble Apex Court in the said case would also not apply in the facts and circumstances of the present case.
6.6 What applies in the present case is the decision of the Hon'ble High Court of Punjab & Haryana in the case of Machino Montell (supra), which is directly on the point of dispute involved in the present case. In that ase also, the question was whether the interest and penal liability would arise or not merely because credit has been reversed before issuance of the show-cause notice. The Hon'ble High Court held that if any of the element such as fraud, collusion, suppression or willful mis-statement are present, the provisions of Section 11A(2B) would not apply and interest and penalty would be imposable. That is the issue involved in the present case. From the evidence available on records, it is clear that the respondent has resorted to fraud and forgery, therefore, the order of the lower appellate authority setting aside the interest and penal liability is clearly bad in law.
7. Accordingly, we set aside the impugned order and restore the order passed by the adjudicating authority. Thus, the Revenues appeal is allowed.
(Dictated and pronounced in Court) (Anil Choudhary) (P.R. Chandrasekharan) Member (Judicial) Member (Technical) Sinha 9