Custom, Excise & Service Tax Tribunal
M/S B. Girijapathi Reddy & Company vs Cce, Guntur on 29 June, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Division Bench Court I Appeal No. E/243/2008 & E/519/2008 (Arising out of Order-in-Original No. 01/2008-C.Ex dt. 12.03.2008 passed by CC, CE & ST, Guntur) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, Member(Technical) 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 B. Girijapathi Reddy & Company ..Appellant(s) Vs. CCE, Guntur ..Respondent(s)
CCE, Guntur ..Appellant(s) Vs. M/s B. Girijapathi Reddy & Company ..Respondent(s) Appearance Sh. Karan Talwar, Authorised Representative for the assessee.
Sh. V.V. Prasad Rao, Assistant Commissioner (AR) for the Revenue.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, Member(Technical) Date of Hearing: 22.06.2016 Date of Decision: _________ FINAL ORDER No._______________________ [Order per: Madhu Mohan Damodhar] The above appeals emanate from the same order of lower authority. One appeal is filed by Assessee whereas, the other is filed by Revenue. The parties are therefore referred to as Assessee and Revenue for the sake of convenience.
2. The facts are as follows:
The Assessee engaged in providing the services of blast hole drilling, blasting, excavation loading, transport, spreading, dumping etc., of the overburden by using machines in the Mining sites of M/s Singareni Collieries Company Limited (SCCL) a Government of India Company, Western Coal Fields Chandrapur, etc., in terms of the agreements entered into with them. The Assessee is registered with the Service Tax Department for the purpose of payment of Service Tax under the category of Site Formation and Clearance, Excavation and Earth Moving and Demolition Services w.e.f. 16.06.2005. For the purpose of undertaking the transportation activities the Assessee procured Volvo Tippers falling under Central Excise Tariff head 8704.23.90 after payment of applicable Central Excise duty and took credit of the excise duty paid on tippers.
3. The Appellant was issued with a Show Cause Notice No. C. No. V (ST)/15/24/2008-Adj, O.R.No.11/2008-S.Tax dated 16.04.2008 proposing to deny the CENVAT Credit of Rs. 6,60,61,607/- availed on the Volvo Tippers procured from Volvo, under rule 14 of the CENVAT Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 plus interest thereon and penalties. Order-in-Original 01/2008 dated 12.03.2008 confirmed the demand of Rs. 6,60,61,607/- as proposed in the Show Cause Notice confirmed the levy of interest under Rule 14 of the CENVAT Credit Rules, 2004, imposed penalty of Rs. 60,00,000/- under Rule 15 of the CENVAT Credit Rules, 2004 and penalty of Rs. 1,000/- under Section 77 of the Finance Act, 1994. Hence this appeal No. 243/2008 by the Assessee.
4. The Department also has filed an appeal against that portion of the impugned Order-in-Original, aggrieved by the decision of the Commissioner of Service Tax of reducing the penalty to Rs. 60,00,000/- under Rule 15 of the CENVAT Credit Rules, 2004. The appeal filed by department by Department is Appeal No. 519/2008 and also have filed Cross objection No. 205/2008 in the appeal filed by assessee.
5. During the hearing the learned advocate appearing for the Assessee Sh. Karan Talwar submitted that the appellant is confining their contest only to the demand of interest and the penalty imposed. He urged that no interest and penalty can be imposed on the appellant since although they had taken the credit on tippers, they had however not utilized the same and had in fact reversed a total amount of Rs. 6,60,61,607/- in April, 2008 from the opening balance of Rs.8,16,19,079/-. In support of his plea he relied on the following judgments:
i. Chandrapur Magnet Wires (P) Ltd., Vs. CCE [1996 (81) ELT 3 (SC)] ii. CCE Vs. Ashima Dyecot Ltd., [2008 (232) ELT 580 (Guj)] iii. CCE Vs. Bombay Dyeing & Mfg Co. Ltd., [2007 (215) ELT 3 (SC)] iv. CCE Vs. Bill Forge Pvt Ltd., [2012 (279) ELT (Kar)] v. CCE Vs. Gokaldas Images (P) Ltd., [2012 (278) ELT 590 (Kar)] vi. CCE Vs. Pearl Insulation Ltd., [2012 (27) STR 337 (Kar)] vii. CCE, Vs. Strategic Engineering (P) Ltd., [2014-TIOL-466-HC-MAD-CX] viii. CCE Vs. Dynaflex Pvt Ltd., [2011 (266) ELT 41 (Guj)] ix. RINL Vs. CCE Final Order No. A/30202/2016 dated 14.03.2016 (Tri-Hyd) x. Ganta Ramanaiah Naidu Vs. CCE [2010 (18) STR 10 (Tri-Bang)] xi. Grasim Bhiwani Textiles Ltd., Vs CCE [2016 (332) ELT 865 (Tri-Bang)] xii. Commissioner of Customs Vs Toyo Engineering India Ltd., [2006 (201) ELT 513 (SC)]
6. Heard both sides. We have also gone through the records of the case.
7. We find that the issue that comes up for decision is whether interest liability will accrue to an assessee in respect of ineligible CENVAT credit availed by them, even if such credit has not been utilized and has been reversed by the assessee. We find that as per Whartons Law Dictionary, 2016 edition Interest is compensation for forbearance or detention of money, Abati Bezbaruah Vs. DY D.G., AIR [2003 SC 1817 (1819): (2003) 3 SCC 148] (Motor Vehicles Act, 1988, s. 171) Interest is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had the use of money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation. [Riches v. Westminster Bank Ltd., [1947 AC 390, 400: (1947) 1 A11 ER 469 (472) E-F] cited in Punjab and Sind Bank v. Allied Beverage Co. (P) Ltd., [(2010) 10 SCC 640 (646)], para 18]
8. Viewed in this context, the mere taking of non-entitled credit by way of a book entry will in no way cause financial adversity to the exchequer, unless such ineligible credit comes to be utilized. We therefore find that by stretch of imagination can the act of taking ineligible credit, however reversing the entire wrongly taken credit without utilization, be considered as creating a right for the government for forbearance or detention of money, or for that matter, loss suffered because the government had not that use. When credit has been solely taken but not utilized, the effect thereof is as if credit was never taken, since book entry availment of CENVAT account cannot be ever treated as a debit entry. We therefore conclude that only when a debit occurs to such CENVAT account, by way of utilization, would the exchequer be adversely affected, since otherwise the assessee would have to pay from account current or cash instead of adjusting from CENVAT account. By implication, in such a scenario, when there is no adverse deprivation to the exchequer, there cannot be a claim of interest that can be latched on to the assessee. Our afore said views find sustenance in number of High Court and Supreme Court judgments.
9. The Honble Apex Court in the case of CCE, Mumbai-I Vs Bombay Dyeing & Manufacturing Company Ltd., [2007 (215) ELT 3 (S.C.)] has interalia held that where credit taken but reversed before utilisation amounts to not taking credit. The relevant portion of the judgement is reproduced below:
?8. There is no merit in this civil appeal. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002-C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming CENVAT credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made before the stage of exemption. Similarly, on payment of duty on the input (yarn) the assessee got the credit which was never utilized. That before utilization, the entry has been reversed which amounts to not taking credit. Hence, in this case, both the conditions are satisfied. Hence item no. 1 of the table to Notification No. 14/2002-C.E. would apply and accordingly the grey fabrics would attract nil rate of duty.
?9. In conclusion on the question of reversal of credit we quote hereinbelow the following para from the judgment of this Court in Collector of Central Excise v. Dai Ichi Karkaria Ltd. reported in 1999 (112) E.L.T. 353. (S.C.) It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available.
10. The Honble High Court of Karnataka in the case of Commissioner of Customs, Excise & Service Tax Vs Bill Forge Ltd., [2012 (279) ELT 209 (Kar)] held that interest liability cannot be claimed from the date of wrong availment of CENVAT credit. The relevant portion of the judgment is reproduced below:
19.?Rule 14 of the CENVAT Credit Rules, 2004 reads as under :
Rule 14.?Recovery of CENVAT credit wrongly taken or erroneously refunded. - Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacture or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.
A reading of the aforesaid provisions makes it very clear that the said provision is attracted where the Cenvat Credit has been taken or utilized wrongly or has been erroneously refunded. In view of the aforesaid judgment of the Apex Court, the question of reading the word and in place of or would not arise. It is also to be noticed that in the aforesaid Rule, the word avail is not used. The words used are taken or utilized wrongly. Further the said provision makes it clear that the interest shall be recovered in terms of Section 11A and 11B of the Act.
20.?From the aforesaid discussion what emerges is that the credit of excise duty in the register maintained for the said purpose is only a book entry. It might be utilised later for payment of excise duty on the excisable product. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. It matures when the excisable product is received from the factory and the stage for payment of excise duty is reached. Actually, the credit is taken, at the time of the removal of the excisable product. It is in the nature of a set off or an adjustment. The assessee uses the credit to make payment of excise duty on excisable product. Instead of paying excise duty, the cenvat credit is utilized, thereby it is adjusted or set off against the duty payable and a debit entry is made in the register. Therefore, this is a procedure whereby the manufacturers can utilise the credit to make payment of duty to discharge his liability. Before utilization of such credit, the entry has been reversed, it amounts to not taking credit. Reversal of cenvat credit amounts to non-taking of credit on the inputs.
11. Even the High Court of AP & T, which is the jurisdictional High Court for this Bench, in Commissioner Cus, CE & ST Vs Bharat Dynamics Ltd., [2016 (331) ELT 182 (A.P.)] after referring to the Indo Swift Laboratories case (supra) held the contention of the Revenue that when credit is wrongly taken the assessee is liable to pay interest to be unsustainable. The relevant portion of the judgment is reproduced below:
5.?The Tribunal, in its order dated 22-10-2013, has recorded the following findings :
In our opinion, the appellant has definitely a case for seeking clarification from the department. In March, 2010, the appellant sought clarification from the department to know whether the clearance of goods to M/s. B.E.L. are exempted from payment of excise duty in terms of notification. In the absence of clarification from the department, they took Cenvat credit during the intervening period i.e. from September, 2010 to March, 2011. They had to take Cenvat credit in September, 2010 since some of the job workers did not return all the inputs within 180 days and they had to reverse the credit. To reverse the credit, they had to take credit. When there was no clarification received from the department till March, 2011, the assessee had no option but to clear two consignments in March, 2011 on payment of excise duty of Rs. 90,94,851/- by utilizing the Cenvat Credit. On getting the clarification from TRU in April, 2011, the appellant reversed the entire amount of Cenvat credit.
In the above circumstances, the only question arises whether in terms of Rule 14 of the Cenvat Credit Rules, 2004, the appellant can be said to have taken credit wrongly. When the credit was not taken wrongly, the question of payment of interest does not arise. In this case, the circumstances discussed above show that the appellant could not have acted any other way than the way they did. In the circumstances, holding that credit was not admissible and was taken without eligibility and therefore asking them to pay interest was not correct. Moreover, any assessee, if he has any doubt, has a right to ask the department and such action is not contrary to the provisions of law. Further, in the circumstances of this case, it cannot be said that the credit had been taken by the appellant wrongly. When credit is not taken wrongly, the question of payment of interest does not arise in terms of provisions of Rule 14 of C.C.R. 2004. In these circumstances, we do not find that the appellant is liable to pay interest since credit taken by them is not wrong in the first place. In the result, appeal is allowed with consequential relief, if any, to the appellant.
6.?From the findings arrived at by the Tribunal as reproduced above, it is obvious that in March, 2010, the appellant in accordance with the relevant provision of law, did seek clarification from the department to know whether the goods on clearance to the respondent-assessee are exempted from payment of Excise duty in terms of the notification and only in the absence of such clarification from the department, they took CENVAT credit during the intervening period i.e. from September, 2010 to March, 2011. It is also clearly observed that after getting clarification from TRU in April, 2011, the appellant reversed the entire amount of Cenvat credit. In that view of the matter, the specific contention put forth by the learned standing counsel that the respondent-assessee, without any eligibility, has taken the Cenvat credit, as such, they are liable to pay interest, is not sustainable.
7.?In view of the categorical findings of fact recorded by the Tribunal and there being no material to disprove those findings, we are of the considered opinion that there is no perversity in the order of the Tribunal and it is purely a question of fact and there is no question of law much less substantial question of law warranting interference by this Court.
12. The assessee has also appealed against the imposition of penalty. We find that in the SCN, penalty was proposed in terms of Rule 15 of CCR, 2004 read with Section 11 A C of the Central Excise Act, 1944. However, the adjudicating authority did not find much force for imposing penalty under section 11 A C or Rule 15 (2) ibid and limited penalty provisions to Rule 15 (1) alone of Rs. 60,00,000/- on the assessee. We are not able to accept the tweaking of the said proposals in the show cause notice by the adjudicating authority only to suit his findings and conclusion. Adjudicating authority did not find force in the grounds for proposal for levy of penalty under Rule 15 read with 11AC , he has held that no suppression, fraud are brought in and that intention to evade payment of tax in cash is not alone sufficient to levy penalties under section 11AC or Rule 15 (2). In the face of such findings, it would have been more legally appropriate for the adjudicating authority to drop the said proposal and desist from imposition of penalty. When the SCN has proposed imposition of penalty in terms of Rule 15 read with 11AC of the Act, (emphasis added), it is not open to the adjudicating authority to selectively impose penalty only under Rule 15 and that too under the more benign Rule 15(1). The proposal in the show cause notice for imposition of penalty should have been accepted and confirmed in toto or not at all. The adjudicating authority cannot travel beyond the SCN. This being the case, and especially taking note of the adjudicating authoritys own findings that there is no suppression, fraud etc., the said proposal in the notice for imposition of penalty under Rule 15 read with S 11 AC ibid will necessarily have to be dropped. In consequence the penalty of Rs. 60 lakhs imposed by adjudicating authority as aforesaid under Rule 15 of the Rules will require to be set aside, which we hereby do. We however do not interfere with the order of the adjudicating authority treating the credit of Rs. 6,60,61,607/- taken by assessee as ineligible credit and ordering them to pay the same back. It is further clarified that as decided, above no interest liability will accrue on the assessee. We also do not interfere with the adjudicating authoritys imposition of penalty of Rs. 1,000/- under section 77 of the Act. The appeal filed by assessee is partly allowed as above.
13. In sequitur, the appeal filed by department against the reduction of penalty fails. The appeal filed by department No. 519/2008 therefore stands dismissed.
14. Both appeals No. E/243/2008 & E/519/2008 disposed of as above.
(Pronounced on___________in open court)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.)
MEMBER(TECHNICAL) MEMBER(JUDICIAL)
Jaya.
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