Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs M/S Jagatjit Industries Ltd on 10 September, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. IV Service Tax Appeal No. 240 of 2009 (SM) [Arising out of the Order-in-Appeal No. 861/CE/JAL/2008 dated 22/12/2008 passed by The Commissioner (Appeal), Chandigarh. ] For Approval and signature : Honble Shri Rakesh Kumar, 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 would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? CCE, Jalandhar Appellant Versus M/s Jagatjit Industries Ltd. Respondent
Appearance Shri S. Gautam, Authorized Representative (DR) for the appellant.
Shri Sudhir Malhotra, Advocate for the respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) DATE OF HEARING : 10/09/2009.
Order No. ________________ Dated : ,,,,,,,,,,,_____________ Per. Rakesh Kumar :-
This is Revenues appeal against order-in-appeal No. 861/CE/JAL/2008 dated 22/12/2008 by which the Commissioner (Appeal) has set aside the order-in-original No. 1-2/AC/J-II/ST/2008 dated 01/7/08 passed by Assistant Commissioner, Central Excise, Jalandhar. The Respondents are manufactures of excisable goods falling under Chapter 11, 19, 28, 34 and 48 of the Central Excise tariff Act 1985, for which they have Central Excise Registration. Beside this, they are also providing management Consultant Service and IPR services for which they have acquired service tax registration under Service Tax Rules, 1994. The Respondent during the period from October 2004 to September 2005, paid service tax amounting to Rs. 12,36,670/- (Rupees Twelve Lakh Thirty Six Thousand Six Hundred Seventy) on Management Consultancy service IPR service provided by them. Though this service tax was paid by the Respondent as service provider on the output service provided by them, they took its Cenvat credit during November 2004 to October 2005 period. When this irregularity was detected by the Departmental officers in November 2005, they reversed the entire amount. However, by that time, out of total credit of Rs. 12,36,670/- they had utilized credit of Rs. 91,000/- and the remaining credit was unutilized beside other credit. The Department first issued a show cause notice dated 23/2/07, wherein the interest of Rs. 8,000/- on amount of Rs. 91,000/- was demanded. Subsequently another show cause notice dated 05/10/07 was issued, wherein the Department demanded the interest on the entire amount of wrongly taken Cenvat credit, including the amount of Rs. 8,000/- for which separate show cause notice dated 23/2/07 had been issued earlier. The second show cause notice also sought imposition of penalty on the Respondent under Section 77 and 78 of the Finance Act, 1994. Thus, both the show cause notices are for the demand of interest on wrongly taken Cenvat credit, which had already been returned in November 2005. Both the show cause notices were adjudicated by the Assistant Commissioner vide order-in-original No. 1-2/AC/J-II/ST/2008 dated 01/7/08 by which, beside confirming the demand of interest, the Assistant Commissioner also confirmed the Cenvat credit demand of Rs. 91,000/-. The amount of credit which had been utilized and also imposed penalty of same amount under Section 78. The Assistant Commissioner also imposed penalty of Rs. 5,000/- on the Respondent under Section 77. On appeal against the Assistant Commissioners order, the CCE (Appeals) vide the impugned order-in-appeal No. 861/CE/JAL/2008 dated 22/12/2008, however, set aside the entire demand and penalty. The interest demand was set aside relying upon Honble Punjab & Haryana High Court judgment in the case of CCE, Delhi III vs. Maruti Udyog Limited reported in 2007 (214) E.L.T. 173 (P & H). It is against this order of the Commissioner (Appeal) that the present appeal has been filed by the Revenue.
2. Heard both the sides.
2.1 Shri S. Gautam, the learned Counsel for the Department assailed the impugned order reiterating the grounds of appeal. He pleaded that the Assistant Commissioner (Appeal)s order setting aside the Cenvat credit demand of Rs. 91,000/- is incorrect, as this amount is part of the wrongly taken Cenvat credit, which has been already reversed by the Respondent. He also pleaded that since the respondent had taken the credit amounting to Rs. 12,36,670/- wrongly, the interest was chargeable on the same irrespective whether the same has been utilized or not, and therefore, the Assistant Commissioner had rightly confirmed its demand.
2.2 Shri Sudhir Malhotra, the learned Counsel for the respondent made the following submissions :-
(1) So far as Cenvat credit demand of Rs. 91,000/- and imposition of penalty of equal amount under Section 78 is concerned, none of the two show cause notices either proposed the demand of Cenvat credit or proposed imposition of penalty under Section 78 as the disputed amount of Cenvat credit, including the amount utilized towards payment of duty, had already been paid in November 2005. He, however, said that since the amount had been paid without any protest, even before the issue of the show cause notice, there was no necessity for the Assistant Commissioner to demand the same.
(2) As regards, the interest on Cenvat credit, he pleaded that the respondent are liable to pay interest only on the amount of Rs. 91,000/- which has been utilized towards payment of duty and in respect of the balance amount which was lying unutilized, they are not liable to pay any interest and in this regard he relies upon Honble Punjab & Haryana High Court judgment in the case of CCE, Delhi III vs. Maruti Udyog Limited (supra),wherein Honble High Court has held that the assessee are not liable to pay interest as the credit was taken as entry in the Modvat record and had not been utilized. This judgment of Honble Punjab & Haryana High Court has been upheld by the Honble Supreme Court in the case of Commissioner vs. Maruti Udyog Ltd. reported in 2007 (214) E.L.T. A50 (S.C.). He emphasized that through out the period, the respondent has sufficient unutilized balance of credit and in November 2005, out of total credit of Rs. 12,36,670/- wrongly taken, only Rs. 91,000/- has been utilized and the balance amount was lying unutilized in the Cenvat credit account.
3. I have carefully considered the submissions from both the sides and have perused the records.
3.1 On going through the show cause notices dated 23/2/07 and 5/10/07, I find that both the show cause notices had been issued for demand of interest on the wrongly taken Cenvat credit of Rs. 12,36,670/-. In the second show cause notice, beside the interest, penal action under Section 77 & 78 of the Finance Act, 1994 was also proposed. None of the show cause notices demanded the wrongly taken Cenvat credit, as about this, there was no dispute and the same had been reversed in November 2005 itself. In view of this, the Assistant Commissioners order demanding a part of the Cenvat credit Rs. 91,000/- and imposing penalty of equal amount on the Respondent under Section 78 is not correct as, by doing so, the Assistant Commissioner has travelled beyond show cause notice. Moreover, when the respondent are not disputing the fact that they had taken this credit wrongly and had reversed in November 2005 without any protest, there would no necessity to confirm the demand the demand for part of the credit which has been utilized more so, when the same had not demanded in the show cause notice. In any case, penalty under Section 78 is not imposable for wrong availment of Cenvat credit.
3.2 As regards the interest on Cenvat credit, in view of Honble Punjab & Haryana High Court judgment in the case of CCE, Delhi III vs. Maruti Udyog Limited (supra), wherein the Honble High Court has held that when inadmissible Cenvat credit was taken but not utilized and subsequently the assessee reversed the same, the assessee was not liable to pay any interest, no interest would be payable by the respondent on the amount of unutilized credit. I find that this judgment of Honble Punjab & Haryana High Court has been upheld by the Honble Supreme Court also in the case of Commissioner vs. Maruti Udyog Ltd. (supra). However, the respondent would be liable to pay interest on the Cenvat credit of Rs. 91,000/- which had been utilized prior to its reversal and accordingly, the Cenvat credit demand of Rs. 8,000/- is correct.
4. In view of the above discussion, while the impugned order is set aside only in respect of interest on the amount of Rs. 91,000/- and in this regard, the Assistant Commissioners order is restored, the rest of the impugned order is upheld. The appeal stands disposed off, as above.
(Dictated and pronounced in open court.) (Rakesh Kumar) Member (Technical) PK