Custom, Excise & Service Tax Tribunal
Echjay Industries Private Limited vs Cce Raigad on 24 October, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO.405
Excise Appeal No. 87828 of 2013
(Arising out of Order-in-Appeal No. BC/694/RGD/2012-13 dated 28.03.2013
passed by the Commissioner of Central Excise(Appeals), Mumbai-III, Belapur)
M/s Echjay Industries Pvt. Ltd. ........Appellant
Village Sarvasai, Taluka-Pen,
Dist. Raigad,
Maharashtra
VERSUS
C.C.E., RAIGAD ........Respondent
Raigad Commissionerate Raigad APPERANCE:
Shri Ganesh K. S. Iyer, Advocate for the Appellant Shri Anil Choudhary, Deputy Commissioner, Authorised Representative for the Respondent CORAM:
HON'BLE MR. AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER NO. A/86898 / 2019 Date of Hearing: 19.08.2019 Date of Decision: 24.10.2019 PER: AJAY SHARMA This appeal has been filed by the Appellant assailing the impugned order dated 28.03.2013 passed by the Commissioner of Central Excise(Appeals), Mumbai-III, Belapur in Order-in-Appeal No.BC/694/RGD/2012-13.
2. The facts of the Appeal in brief are as follows. The Appellants availed CENVAT Credit on capital goods at 100% of the duty paid E/87828/2013 2 whereas as per the Cenvat Credit Rules, capital goods credit can be taken only to the extent of 50% of the duty paid in the first year and the balance 50% has to be availed in the second year subject to the capital goods being available and put to use. The period involved in the Appeal is from years 2004-05 to years 2008-09. The said availement was noticed during the course of EA-2000 audit as communicated vide their reference dated 13.1.2010. Upon being pointed out by the audit, the Appellants, immediately reversed the Cenvat Credit alongwith interest under protest on 4.2.2010. Later it came to the notice of the Appellants that during the period in issue they had only availed the Cenvat Credit in their books and not utilized the credit at all. Therefore the Appellants filed the application for refund of interest amount of Rs.4,51,725/- paid by them while reversing the Cenvat Credit. A show cause notice dated 27.10.2010 was issued to the Appellants proposing to reject the claim of refund of interest and the said claim was rejected by the Adjudicating Authority vide Order-in-Original dated 20.4.2011. The Appeal against the aforesaid order was dismissed by the Commissioner (Appeal) vide order dated 22.5.2012 on the ground of limitation. Aggrieved, the Appellants filed appeal before this Tribunal and the Tribunal vide order dated 12.9.2012 condoned the delay in filing appeal before the Commissioner (Appeals) and directed the Commissioner (Appeals) to decide the Appeal on merits. The Commissioner (Appeal) thereafter vide impugned order dated 12.4.2013 rejected the Appeal filed by the Appellants.
E/87828/2013 3
3. I have heard learned counsel for the appellants and learned Authorised Representative for the Revenue and perused the records of the case including the documents submitted by both the sides. The learned counsel submitted that the Appellant immediately upon being pointed out by audit, reversed the entire excess Cenvat credit (which was availed by the appellants under bona fide belief) with interest, but later the appellants came to know that there was sufficient credit balance of capital goods credit in their books and therefore they filed a refund claim to the extent of excess interest paid. Learned counsel further submits that as per Rule 14 of Cenvat Credit Rules, 2004, interest on late payment of Cenvat Credit is payable only when the Cenvat credit was wrongly taken and utilized by the assessee, whereas in the instant matter the Cenvat credit was availed by the appellants under bona fide belief and the same was not utilized by the appellants since during that period there was sufficient credit balance available in its books of accounts. He further submits that the learned Commissioner erred in relying upon the decision of the Hon'ble Supreme Court in the matter of Union of India vs. Ind-Swift Laboratories Ltd.; 2011(265) ELT 3 (SC) whereas the same has been distinguished by the Hon'ble High Court of Karnataka in the matter of Commissioner vs. Bill Forge Pvt. Ltd.; 2012(279) ELT 209 (kar.) and as per the decision of the Hon'ble Karnataka High Court in the matter of Bill Forge Pvt. Ltd. (supra) the appellant is not liable to pay any interest and is entitle for refund of the interest amount of Rs.4,51,725/-. He also submits that the show cause notice was issued proposing to reject the claim as the payment of the duty E/87828/2013 4 alongwith interest had been considered under provisions of Section 11A(2B), Central Excise Act, 1944 wherein there was no provision for refund of any excess interest paid. Whereas the basis for arriving at this conclusion is not correct as the credit has been availed bonafidely and was not utilized and hence there was no short payment of duty and hence Section 11A ibid is not applicable. Per contra learned Authorised Representative for Revenue reiterated the findings recorded in the impugned order and prayed for dismissal of appeal and also placed on record the communication dated 3.9.2009 issued by the Ministry of Finance, Department of Revenue in support of his submission that the interest shall be recoverable when credit has been wrongly taken, even if it has not been utilized, in terms of the wordings of the present Rule 14. He also submits that in view of Section 11A(2B) ibid the interest on wrongly availed Cenvat credit against capital goods was payable by the assessee and it can't be refunded at a later stage because as per explanation 2 of Section 11A(2B) interest shall be payable on the amount paid. Learned counsel submits that Board's clarification dated 3.9.2009 can be applicable prospectively and not for the past period. He also submits that credit wrongly availed does not amount to short payment of duty since it is merely a book entry. Therefore when there is no short payment of duty, Section 11A won't get attracted.
4. There is no dispute that the recovery of the wrongly/mistakenly availed credit is governed by Rule 14 of CCR, 2004. The issue is whether the appellant is liable to pay interest for the mistakenly/irregularly availing Cenvat credit which they did not E/87828/2013 5 utilize? It is the specific case of the Appellant that the Cenvat credit was availed by the appellants under bona fide belief and the same was not utilized by the appellants since during that period there was sufficient credit balance available in its books of accounts. The Hon'ble Karnataka High in the case of CCE & ST, LTU, Bangalore v. Bill Forge Pvt. Ltd.;2012 (279) E.L.T. 209 (Kar.) after considering the Hon'ble Supreme Court's decision in the case of UOI v. Ind-Swift Laboratories Ltd. 2011 (265) E.L.T.3(S.C.) held that if the wrongly availed credit does not stand utilised by the assessee and is reversed before utilisation, no interest liability would arise against them. A coordinate Bench of the Tribunal on an identical issue, while taking note of the law laid down by the Hon'ble Supreme Court in the matter of Ind-Swift Laboratories Lt. (supra) as well as the decision of the Hon'ble Karnataka High Court in the matter of Bill Forge Pvt. Ltd. (supra), allowed the appeal filed by the assessee therein. The relevant paragraph of the said decision is as under:-
" xxx xxx xxx
5. I find from available records that the Cenvat credit taken irregularly has not been utilized for payment of Central Excise Duty on removal of the finished goods. Thus, there is no loss of Revenue, and as such, interest demand for late reversal of Cenvat credit is not proper. In this context, the Hon'ble Karnataka High Court in an identical set of facts in the case of Bill Forge (supra) have held that the assessee have not taken or utilized the credit but only availed wrong credit in their account book and on pointing out the mistake, since the assessee reversed the entry, it cannot be said that any benefit of such wrong entry was taken, and thus, the interest is not payable. The issue involved in the case of Ind-Swift Laboratories Ltd. (supra) is different from the facts of the present case, inasmuch as, the Cenvat credit was taken by the assessee on the strength of fake invoice and the credit was not reversed by the assessee but it was recovered by way of demanding duty. Since, in the present case, Cenvat credit before its utilization was reversed by the appellant, the said judgment of Hon'ble E/87828/2013 6 Supreme Court relied on by the ld. D.R. is not applicable to the facts of this case. In view of above, I am of the opinion that interest cannot be demanded from the appellant, since the credit taken has not been utilized for payment of Central Excise duty. Thus, I do not find any merits in the impugned order and the same is set aside. The appeal is allowed in favour of the appellant." In another decision, a coordinate bench of the Tribunal in the matter of Nova Petrochemicals Ltd. vs. CCE, Ahmedabad; 2017(49) STR 125(Tri.-Ahmd.) in an identical issue, allowed the appeal filed by the assessee therein, while taking note of the decision of the Hon'ble High Court of Judicature at Madras in the matter of Commr. vs. Strategic Engineering Pvt. Ltd.; 2014(310) ELT 509 (Mad.) and observed that the Hon'ble Madras High Court in the matter of Strategic Engineering Pvt. Ltd.(supra) after considering the decision of the Hon'ble Supreme Court in the matter of Ind-Swift Laboratories Ltd. (supra) held that mere taking credit itself would not compel the assessee to pay interest and also observed that subsequent amendment of Rule 14 ibid would make it clear.
5. A larger Bench of the Tribunal in the matter of J.K. Tyre & Ind. Ltd. vs. Asst. Commr. of C. Ex., Mysore; 2016 (340) E.L.T. 193 (Tri.
- LB) has held that since the appellant therein had merely availed credit and had reversed the same before utilizing the availed credit for remittance of duty, interest liability would not arise. Similarly, another co-ordinate Bench of the Tribunal in another similar matter titled as CCE, Raipur vs. Sharda Energy & Minerals Ltd.; 2017 (49) STR 193 (Tri.-Del) in which the appeal was filed by Revenue, while dismissing the Revenue appeal held as under:-
" xxx xxx xxx
E/87828/2013
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8. Learned Advocate appearing for the respondent draws my attention to a latest decision of the Hon'ble High Court of Karnataka in the case of Commissioner of Central Excise and S.T., Bangalore v. Bill Forge Pvt. Ltd. - 2012 (26) S.T.R. 204 (Kar.) = 2012 (279) E.L.T. 209 (Kar.). The Supreme Court decision in the case of Ind-Swift Laboratories Ltd. was considered and it was held, that the interest would be payable from the date Cenvat credit is taken or utilized wrongly. By following the said decision of the Hon'ble Supreme Court, the Hon'ble Karnataka High Court, in an identical set of facts held that the assessee had not taken or utilized the Credit but only availed wrong credit in their account books and on pointing out the mistake, immediately reversed the entry. As no benefit of wrong entry in account books was taken, interest is not payable. The said order of the Karnataka High Court stand subsequently followed by them in the case of Commissioner of Central Excise, Bangalore v. Pearl Insulation Ltd. - 2012 (281) E.L.T. 192 (Kar.) = 2012 (27) S.T.R. 337 (Kar.).
9. Inasmuch as issue stands decided, by Karnataka High Court by interpreting Supreme Court decision in Ind-Swift and the facts are not in dispute, I find no merits in the Revenue's appeal. The same is accordingly rejected."
6. It is not disputed that the irregularly availed Cenvat Credit was reversed by the appellants immediately upon being pointed out by the audit that too with interest and therefore no show cause notice was issued for that purpose. The said credit was not utilized by the appellant for payment of excise duty etc. It is merely a book entry and therefore the credit wrongly availed does not amount to short payment of duty. The interest is compensatory in nature and is liable to be paid only when the principal amount is paid belatedly or there is any loss to the government exchequer. In other words, the provisions to recover interest are enacted to compensate the exchequer for the delay it suffers in receiving the revenue due to it. The credit having been taken inadvertently stands reversed by the Appellant even before utilisation, no interest liability would arise inasmuch as there is no loss to the Revenue and the credit remained E/87828/2013 8 as a paper entry in their books of accounts. Since there was no loss of revenue to the government exchequer, therefore the question of compensating the revenue by way of interest does not arise. In the facts of the present case, Revenue cannot impose liability to pay interest on the assessee invoking the provisions of Rule 14 of Cenvat Credit Rules, 2004.
7. In view of the discussions made hereinabove and also in view of the consistent view of the Tribunal in the decisions cited supra, I am of the opinion that the appellant is not liable to pay the interest while reversing the Cenvat credit belatedly. Accordingly, the appeal filed by the appellant deserves to be allowed, with consequential relief as per law.
(Order pronounced in the open Court on 24.10.2019) (Ajay Sharma) Member (Judicial) sb