Custom, Excise & Service Tax Tribunal
M/S Rane Engine Valves Ltd vs The Commissioner on 16 March, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench Single Member Bench Court I Appeal No.E/2418/2011-SM (Arising out of Order-in-Appeal No.63/2011(H-IV), Dated 24-06-2011 passed by Commissioner of C.CE&ST(Appeals-II) Hyderabad) For approval and signature: Honble Ms. Sulekha Beevi, C.S. Member(Judicial) 1. Whether Press Reporters may be allowed to see 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s Rane Engine Valves Ltd. Ranga Reddy District ..Appellant(s) Vs. The Commissioner. C.C.E&ST,Hyderabad: IV ..Respondent(s)
Appearance Shri P.Dwarakanath & B.Venugopal, Advocates for the Appellant Shri S.P.Rao, AR for the Respondent Coram:
Honble Ms. Sulekha Beevi, Member(Judicial) Date of Hearing : 26/02/2016 Date of decision: 16/03/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.]
1. The appellants are aggrieved by the demand of interest and the penalty imposed.
2. The appellants are engaged in the manufacture of Engine Valves and are availing Cenvat credit facility on inputs and capital goods. During scrutiny of ER-I returns for the month of February, it was found that appellants had reversed an amount of Rs.7,51,009/- by way of debit entry. On being asked the appellant vide letter dated 23-09-2009 clarified that they availed credit on capital goods to the extent of 100% in the year of receipt instead of availing 50% in the year of receipt and balance 50% in the subsequent year. That they then reversed the erroneously availed excess 50% of Rs.7,51,009/-. The department entertained the view that appellants are liable to pay interest on the excess credit availed till the date of reversal and are also liable to penalty for contravention of provision of Cenvat Credit Rules, 2004. A show cause notice was issued proposing to demand the excess availed credit along with interest and also to impose penalty. After due process of law, the original authority confirmed the demand along with interest and imposed equal amount of penalty. The appellants filed appeal before the Commissioner (Appeals). As per the order impugned herein, the Commissioner (Appeals) upheld the demand along with interest, but reduced the penalty to Rs.1,87,752/-. Hence the present appeal.
3. On behalf of the appellant, the learned counsel Shri B.Venugopal submitted that the appellant is challenging only the demand of interest and the penalty imposed. He submitted that the credit taken was reversed before utilization and that therefore, the appellants are not liable to pay interest and that no penalty is sustainable. He also submitted that appellants have not only reversed the credit before utilization but also paid the interest of Rs.81,850/- The learned counsel relied on the judgments laid in the case of CCE & ST LTU Bangalore Vs Bill Forge Ltd 2012(279) ELT 209(Kar) and CCE, Madurai Vs Strategic Engineering (P)Ltd 2014(310) ELT 509(Mad).
4. Against this, the learned AR submitted that appellants have taken excess credit in the year of receipt of capital goods. The act of appellants amounts to contravention of the provisions of Cenvat Credit Rules, 2004 and that therefore, the levy of interest and penalty is just and proper.
5. I have heard the submissions made on either side. The appellants challenge the demand of interest and imposition of penalty only. It is not disputed that appellants reversed the credit prior to utilization of the same. The issue whether interest is payable on credit which was availed but reversed before utilization was analyzed in the cases referred by the counsel for appellant. In the case of Bill Forge(P)Ltd and Strategic Engineering Ltd. case the Honble High courts have taken the view that no interest is payable when the credit is reversed before utilization. Following the dictum laid in these judgments, I hold that the demand of interest is not sustainable.
6. In the present case the error committed by the appellant is that the entire credit was availed in the same year (year of receipt of capital goods) In any case, the appellant was eligible to avail the balance 50% (the excess credit) in subsequent year. In such circumstances, I am of the view, that there is no sufficient justification to impose penalty.
7. In view of the foregoing, the impugned order is modified to the limited extent of setting aside the demand of interest and imposition of penalty. The appeal is partly allowed in above terms.
(Pronounced on 16/03.2016 in open court) ( SULEKHA BEEVI. C.S.) MEMBER(JUDICIAL) Dks 2