Custom, Excise & Service Tax Tribunal
M/S Hyt Engg. Co. Pvt. Ltd vs Commissioner Of Central Excise, Pune-I on 5 September, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/1592 to 1596/2011 (Arising out of Orders-in-Appeal No. PI/RKS/112/2011, PI/RKS/113/ 2011, PI/RKS/114/2011 dated 8.8.2011, PI/RKS/145/2011 & PI/RKS/146/2011 dated 12.10.2011 passed by the Commissioner of Central Excise (Appeals), Pune-I). For approval and signature: Honble Shri S.S. Kang, Vice-President Honble Shri Sahab Singh, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No 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 : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s HYT Engg. Co. Pvt. Ltd. M/s HYT Machines Co. Pvt. Ltd. Appellants Vs. Commissioner of Central Excise, Pune-I Respondent Appearance: Shri J.C. Patel, Advocate with Shri A.G. Kulkarni, Advocate for Appellants Shri V.R. Kulkarni, Advocate for Respondent CORAM: SHRI S.S. KANG, VICE-PRESIDENT SHRI SAHAB SINGH, MEMBER (TECHNICAL) Date of Hearing: 05.09.2012 Date of Decision: 05.09.2012 ORDER NO. Per: Sahab Singh
These are five appeals filed by M/s HYT Engg. Co. Pvt. Ltd. (hereinafter referred to as appellants) against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune-I as per details given below: -
Appeal No. Order-in-Appeal No. E/1592/2011 PI/RKS/112/2011 dated 08.08.2011 E/1593/2011 PI/RKS/113/2011 dated 08.08.2011 E/1594/2011 PI/RKS/114/2011 dated 08.08.2011 E/1595/2011 PI/RKS/145/2011 dated 12.10.2011 E/1596/2011 PI/RKS/146/2011 dated 12.10.2011
2. The brief facts of the case are that the appellants are holder of Central Excise Registration and are engaged in the manufacture of Special Purpose Machines for Indian Railways falling under Chapter No. 84 of the Central Excise Tariff Act, 1985. The appellants availed CENVAT Credit on inputs, capital goods and input services under the provisions of Cenvat Credit Rules, 2004. On the basis of information that the appellants were evading payment of Central Excise duty, investigations were carried out and on investigation the following issues came to notice:-
(i) Wrong availment of CENVAT Credit on certain optional accessories which were not inputs but cleared along with the final products and the value of which was not part of the transaction value.
(ii) The failure to determine the correct value of the goods cleared to their sister unit as per provisions of Rule 8 and Rule 9 of the Central Excise Valuation Rules leading to short payment of duty.
(iii) Undervaluation of their final products by not including the forwarding charges recovered by them from their customers by issuing commercial invoices during the relevant period leading to the short payment of duty
(iv) Non-payment of duty on clearance of inputs as such cleared to their group companies without any invoices and without reversing CENVAT Credit availed on such input.
Accordingly, the show-cause notices were issued to the appellants demanding inadmissible CENVAT Credit under Rule 14 of the Cenvat Credit Rules read with Section 11A of the Central Excise Act, 1944 and also demanding the duty on goods cleared for captive consumption to their sister unit and on forwarding charges during the relevant period under Section 11A of the Central Excise Act and also demanding interest at appropriate rate under Section 11AB of the Act and also proposing imposition of penalty under Section 11AC of the Act read with Rule 15 of the Cenvat Credit Rules. These show-cause notices were confirmed by the original authority and CENVAT Credit/duty demanded was confirmed along with interest and penalty was imposed under Section 11AC of the Central Excise Act read with Rule 15 of the Cenvat Credit Rules. The appellants filed appeal before the Commissioner (Appeals), who vide the impugned orders taking into consideration the fact that the duty along with interest has already been paid by the appellants has waived the penalty in respect of issues No. (ii) and (iii) and confirmed the penalty for issue No. (i) & (iv) mentioned in para 2 above. The appellants have challenged the impugned orders in these appeals.
3. The learned Advocate appearing for the appellants submitted that the excise duty and interest have already been paid in respect of all four issues, but the Commissioner (Appeals) has not accepted their submissions in respect of the two issues. Therefore, they are in appeal before the Tribunal. He submitted that non-reversal of CENVAT Credit in respect of optional accessories were purely a clerical error on the part of their staff and credit was reversed immediately after the Audit Party pointed out and there was no intention to evade payment of duty on account of fraud and suppression. He therefore submitted that the Commissioner (Appeals) had not appreciated that non-payment of duty on clearance of the input as such to the appellants another unit was revenue neutral situation inasmuch as if they pay duty at one unit then they are eligible for CENVAT Credit at another unit. There was no dispute that even after clearance of these inputs, these were used in or in relation to manufacture of final dutiable products and, therefore, there could not be any possibility with the intention of evading the Central Excise duty as the whole exercise was revenue neutral inasmuch as the receiving unit was entitled for CENVAT Credit of duty paid by the sending unit. He pointed out that under Section 11A (2B) when the any duty along with interest has been paid by the assessee, there cannot be any case of imposition of penalty and even in such situation, no show-cause notice is required to be issued to the assessee. He relied upon the decision of the Tribunal in the case of Mafatlal Industries Ltd. Vs. Commissioner of Central Excise, Daman reported in 2009 (241) ELT 153 (Tri-Ahmd), which was confirmed by the Hon'ble Supreme Court as reported in Commissioner Vs. Mafatlal Industries Ltd. 2010 (255) ELT A77 (SC). He also relied upon the decision of the Hon'ble High Court of Karnataka in the case of CCE&ST, LTU, Bangalore Vs. Adecco Flexione Workforce Solutions Ltd. reported in 2012 (26) STR 3 (Kar) in support of his contention that when tax and interest has been paid before issue of show-cause notice, no notice is required to do so to the assessee.
4. Learned Dy. Commissioner (A.R.) appeared for the Revenue reiterated the findings of the lower authorities and submitted that the appellants were well aware that they were not paying duty on clearance of optional accessories and the same were optional bought out items. They have intentionally availed the CENVAT Credit although they were well aware that the value of said accessories was not included in the assessable value of the final products. As regards the clearance of the input as such, he submitted that the appellants have cleared such inputs to the sister unit without raising any invoices for such clearances and the appellants were not new to the procedure of the Central Excise Act and Rules made thereunder. Hence, the Commissioner (Appeals) has rightly confirmed the penalties on the appellants.
5. After hearing both sides, we find that the demand of short paid duty/CENVAT Credit liability along with the interest thereon has already been accepted and paid by the appellants and the same is not being contested by them. The appellants only challenged the imposition of penalty under Rule 15 of Cenvat Credit Rules read with Section 11AC of the Central Excise Act, 1944.
6. As regards the wrong availment of CENVAT Credit on the certain optional accessories, which were not the inputs, the appellants contention is that non-reversal of CENVAT Credit was purely a clerical mistake on part of the operating persons. We find that the appellants were aware that no duty was being paid on the clearances of the optional accessories as the same were optional and bought out items. In terms of provisions of Rule 3(5) of the Cenvat Credit Rules, they were required to reverse/pay the amount equal to the CENVAT Credit availed on such accessories while clearing the same along with the final product, which they have not done and such a mistake cannot be accepted as a clerical error and the appellants submissions in this regard are rejected. Since they have availed such credit despite knowing that the value of such accessories is not included in the assessable value of the final products and nor these accessories/inputs are capital goods for such product, the intention to wrongly avail CENVAT Credit is quite obvious and consequently they are liable for penal action under Rule 15 of the Cenvat Credit Rules read with Section 11AC of the Act. Accordingly, we confirm the Commissioner (Appeals) finding regarding the confirmation of penalty on this issue.
7. As regards the issue of clearance of inputs as such to their sister unit, we find that the appellants have cleared the input as such without raising any invoices for such clearance and they have neither paid the duty nor reversed the CENVAT Credit. If the said issue was not noticed by the Revenue, the appellants would have continued to clear the inputs to their sister unit without payment of duty. Therefore, the appellants have clearly violated the provisions of the Cenvat Credit Rules and accordingly, liable to penalty under Rule 15 of the Cenvat Credit Rules.
8. Since in both the issues there was clearly the intention to evade the payment of duty, the penalties on the appellants have rightly been imposed by the Commissioner (Appeals).
9. As regards the reliance of the appellant on the case of Mafatlal Industries Ltd. (supra) on the ground of revenue neutrality, we find that relief on the ground of revenue neutrality is not applicable to the appellants as wherever the intention to evade the payment of duty is found, in such situation the benefit on ground of revenue neutrality is not available to the appellants. Similarly, the reliance placed on the Karnataka High Courts decision in the case of Adecco Flexione Workforce (supra), that once the tax has been paid along with interest before issuance of show-cause notice, there is no need to issue show-cause notice. We find that under Section 11A(2B), the show-cause notice is not required to be issued for demanding the tax alongwith the interest, once the tax and interest has been paid before the issuance of show-cause notice. But, as per Explanation 1 of the Section 11A(2B), such benefit is not available when there is contravention of any of the provisions of Act and Rules with intent to evade payment of duty, as is the case in the present appeal. Therefore, we are of the view that since the appellants intentionally contravened the provisions of Cenvat Credit Rules to evade the payment of duty, the ratio of this decision is not applicable to the appellants. Accordingly, we uphold the impugned orders and dismiss the appeals.
(Pronounced in Court)
(S.S. Kang) (Sahab Singh)
Vice-President Member (Technical)
Sinha
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