Custom, Excise & Service Tax Tribunal
Ranbaxy Laboratories Ltd vs Cce & St, Chandigarh-I on 31 July, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017
COURT NO. II
Appeal No. E/56067/2013
[Arising out of Order-in-Appeal No. 22/CE/APPL/Chd-I/2013 dated 11.02.2013 passed by the Commissioner of Central Excise (Appeals) Chandigarh-I.]
Date of hearing: 07.07.2017
Date of decision: 31.07.2017
For approval and signature:
Honble Mr. Devender Singh, Member (Technical)
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Ranbaxy Laboratories ltd.
Appellant(s) VS CCE & ST, Chandigarh-I. :
Respondent(s) ========================================== Appearance:
Sh. Amrinder Singh, Advocate for the Appellant(s) Sh. Tarun Kumar, AR for the Respondent(s) CORAM:
Honble Mr. Devender Singh, Member (Technical) FINAL ORDER NO. 61399/2017 Per : Devender Singh The appellant is in appeal against the impugned order.
2. The appellant is manufacturer of bulk drugs & P&P Medicaments and avail Cenvat Credit on inputs used in manufacture of final products. They had taken Cenvat Credit on the furnace oil as an input during the period 10.01.2005 to 31.01.2007. During the process of audit, it came to the notice that they had opted for area based exemption. There was another unit of the appellant on which no exemption was availed. A common boiler was supplying steam to both the exempted as well as non exempted unit. Furnace oil was being used as an input in said boiler. It came to the notice that the appellant had failed to intimate both the stock of furnace oil lying in stock and these goods contained in finished goods on the date of opting for exemption. It was also pointed out that they were not entitled to avail Cenvat Credit on furnace oil for manufacture of exempted and non-exempted goods. Further, they were not maintaining separate accounts for the furnace oil but were maintaining the separate record for steam, which was an intermediate product. Revenue felt that as they were not maintaining separate accounts of furnace oil under Rules 6(2) of Cenvat Credit Rules, there was incorrect availment of credit of Rs. 1,40,75,259/-. The appellant reversed the credit of Rs.1,85,611/- and Rs.1,40,75,259/- on both counts on being pointed out by the Revenue. A show cause notice was issued on 19.11.2008 for demand of interest on the amount reversed by the appellant and proposing penalty under Rule 15 of the Cenvat Credit Rules read with Section 11AC of the Central Excise Rules. The matter was adjudicated. The adjudicating authority confirmed the demand of Rs. 14,10,883/- and imposed the penalty of Rs. 1,00,000/- on the appellant under Section 11AC read with Rule 15 of the Cenvat Credit Rules. In appeal filed by the appellant, the Ld. Commissioner (Appeals) confirmed both the demand of interest and the penalty of Rs. 1,00,000/- imposed by the adjudicating authority. Aggrieved from the order of the Ld. Commissioner (Appeals), the appellant is before this Tribunal.
3. Ld. Advocate for the appellants submits that there is no allegation of suppression or any other element of Section 11AC and the extended period in the show cause notice dt. 19.11.2008 for the period 10.01.2005 to 31.01.2007. Hence, the entire demand of interest is barred by time. He also drew attention to the order of both the lower authorities contending that they have not upheld the Section 11AC and imposed penalty of only Rs. 1,00,000/- and not the equivalent penalty. He stressed that the adjudicating authority had taken a lenient view and the same implies that the elements of mandatory penalty were not present and hence extended period could not be applied. He further contended that had they reversed proportionate Cenvat Credit, the reversal would have been much less. He also stated that they were maintaining the separate accounts for supply of steam from which the furnace oil consumption for each factory could be worked out and this fact was in the knowledge of the Department, which is evident from the Departments comments at Page 125 to 127 of the Paper Book. Ld. Advocate also pointed out that the Ld. Commissioner (Appeals) had relied upon the judgment of Hindustan Insecticides Ltd. Vs. CCE (supra) which had been set aside by the Hon'ble Delhi High Court in the case of Hindustan insecticides Ltd. Vs. CCE (2013 (297) ELT 332 (Del.) He relied upon the following case laws:-
1. CCE Vs. VAE VKN Industries Pvt. Ltd. -2015 (322) ELT 269 (P&H).
2. Kwality Ice Cream Company Vs. UOI 2012 (281) ELT 507 (Del.).
3. Jai Bharat Maruti Ltd. Vs. CCE 2014 (307) ELT 282 (P&H).
4. Hindustan insecticides Ltd. Vs. CCE 2013 (297) ELT 332 (Del.).
4. Ld. AR stated that though the suppression and extended period were not mentioned in show cause notice, nevertheless, the incorrect availment of Cenvat Credit was noticed during the course of audit. He stated that the reversal of the Cenvat Credit was not done voluntarily but was done at the behest of the audit. He relied upon the following judgments:-
1. Mahindra & Mahindra Ltd. Vs. CCE, Nashik 2016 (343) ELT 57.
2. Commissioner of Trade Tax, Lucknow Vs. Kanhai Ram Thekedar 2005 (185) ELT 3 (SC)
3. Bisleri International Vs. CCE, Chennai 2009 (241) ELT 556 (Tri. Chennai).
5. Heard the parties and examined the records.
6. In the present proceedings, the show cause notice dated 19.11.2008 is for demand of interest amounting to Rs.14,10,883/- and penalty under Rule 15 CCR, 2004 read with Section 11AC of the Act. The interest is being demanded on incorrectly availed Cenvat credit of Rs.1,40,75,259/- for non maintenance of separate accounts during the period 10.1.2005 to 31.1.2007 and non reversal of credit of Rs.1,85,611/- on opting for exemption. I find that the reversal of the credit was not done voluntarily but it was done after it was detected and pointed out by the audit.
6.1 As rightly pointed out by Ld. Advocate, in the show cause notice, there is no allegation of suppression or other elements required for extended period nor is there express invocation of extended period. The Ld. Commissioner has upheld the demand of interest on the basis of CESTAT judgment in the case of Hindustan Insecticides Ltd. vs. CCE-2012 (286) ELT 208 (Tri.Del.) in which it was held as below:
Demand - Limitation - Interest liability - It is determined by Department under Section 11A(2) of Central Excise Act, 1944 or self-determined by assessee under Section 11A(2B) ibid thereof or self-assessed by assessee for particular month under Rule 6 of Central Excise Rules, 2002 - In all these cases, interest liability is automatic - It is a sum due to the Government, which if not paid, can be recovered directly by following procedure prescribed in Section 11 ibid for which there is no limitation period is prescribed - Neither separate written show cause notice nor adjudication process is required for that purpose - In that view, limitation prescribed under Section 11A ibid is not applicable for its recovery - Show cause notices issued in these cases, even if invoking Section 11A ibid, have to be treated as mere communication for recovery of interest under Section 11 ibid.
7. However, the aforesaid judgment of the Tribunal has been set aside by the Honble Delhi High Court in the case of Hindustan insecticides Ltd (supra). In the said judgment, Honble Delhi High Court has held as below:
12.?In the present case there is no allegation and it cannot be held that the longer period of limitation of five years is applicable. It cannot be said that the short payment was due to fraud, collusion, etc., which means intentional, deliberate or deceitful means. In view of the aforesaid position, it has to be held that the period of limitation of one year would apply to the present cases and the show cause notices were belated and barred by limitation.
13.?Tribunal in the impugned decision has referred to the decision of the Supreme Court in Commissioner of Trade Tax, Lucknow v. Kanhai Ram Thekedar - 2005 (185) E.L.T. 3 (S.C.). The said decision arose out of proceedings initiated under the U.P. Sales Tax Act, 1948 (subsequently known as U.P. Trade Tax Act, 1948). After referring to the applicable provisions it was held that levy of interest was automatic under the provisions of the said Act, interest should have been paid voluntarily and by non-payment the respondent therein had become a defaulter. In these circumstances, it was observed by the Supreme Court as under :-
17.?Thus, we are of the opinion that the High Court was not justified for deleting the interest levied by the authorities on the ground that no notice was served. In this view, the impugned judgment would normally be unsustainable. However, as already noticed, the respondent-assessee has specifically urged that the subsequent proceedings to the assessment is barred by limitation and that even though the order was passed on 6-6-1986 imposing tax liability etc., the assessing authority had passed another order only on 30-7-1990 holding that on admitted amount of tax, the assessee was liable to pay interest at 24% p.a. from 1-5-1978 and, therefore, on the question of delay in demanding interest, the demand has to be set aside. This argument of the learned counsel appearing for the respondent merits acceptancc. In this case, the assessment relates to the assessment year 1977-1978. The respondent furnished his return to the assessing authority and the assessing authority passed an assessment order against the respondent and in accordance with the assessment order, the assessee has deposited the entire amount of tax amounting to Rs. 15,236.98 paise on 30-8-1986 and Rs. 2,817/- on 26-6-1982. However, on 30-7-1990, the assessing authority passed an order imposing interest against the respondent. Thus the demand was after nearly four years. There was no demand of interest in the assessment order which, in our opinion, form part of the assessment order. As the assessment order did not include a claim for interest, the demand for interest had to be made within a reasonable period thereafter. To be noted that for rectification of the assessment order, a limitation period of three years is laid down. Since the demand of interest was made after almost four year, we hold that the demand is not within a reasonable period and the assessee is not liable to pay the interest as demanded. The Department is not entitled to recover the interest from the assessee-respondent but is at liberty to recover the amount of interest demanded from the Assessing Officer concerned who have not taken steps for four years.
14.?A reading of the aforesaid paragraph would show that in the said case notice of payment for interest was issued after four years and it was held that it was beyond a reasonable period and the department could recover the amount from the Assessing Officer, who had not taken steps for four years and not from the respondent-assessee therein. The finding of the Supreme Court on interpreting the applicable Act was that no limitation period was prescribed, therefore, proceedings for recovery could be initiated within a reasonable time. The ratio in the said case is distinguishable for the reason that payment of interest is to be made under Section 11A and, therefore, the period of limitation prescribed therein would equally apply as has been held by the Delhi High Court in the case of Kwality Ice Cream Company (supra), Punjab and Haryana High Court in the case of M/s. VAE VKN Industries Private Limited (supra) and Gujarat High Court in Gujarat Narmada Fertilizers Company Limited (supra). These judgments have relied upon the decision of the Supreme Court approving the view of the Tribunal in TVS Whirlpool Limited (supra) wherein pari materia provisions of the Customs Act were considered. This being a distinguishing feature, we feel that the appellant is entitled to succeed in the present appeals. The question of law is accordingly answered in affirmative, i.e., in favour of the appellant and against the respondent-Revenue.
8. In view of the above settled position of law, which is squarely applicable to the facts of the present case, the demand of interest is clearly unsustainable.
9. As for the penalty, the show cause notice had proposed penalty under Rule 15 of CCR, 2004 read with Section 11AC without alleging any suppression, fraud or other elements of Section 11AC. Even though, he has given a finding that the appellant are liable to pay penalty under Rule 15 of CCR, 2004 read with Section 11AC of the Act, the adjudicating authority did not impose 100% penalty but took lenient a view and imposed penalty of Rs.1 lakh. From this it is evident that the adjudicating authority was not convinced that the elements of Section 11AC were present. However, in the operative part of the order, the adjudicating authority has imposed penalty of Rs.1,00,000/- but the same has been done under Section 11AC of the Act read with Rule 15 of CCR, 2004. Penalty under Section 11AC cannot be imposed in the absence of allegation of suppression in the show cause notice. Besides, discretion to reduce mandatory penalty does not vest with adjudicating authority. Considering the inherent contradiction in the show cause notice and the patently perverse nature of the order passed by the adjudicating authority in relation to penalty, the same is set aside.
10. In the result, the appeal is allowed.
(Order pronounced in the Court on 31.07.2017) Devender Singh Member (Technical) mk 2 E/56067/2013-CHD