Custom, Excise & Service Tax Tribunal
M/S R.D. Engineers (I) Pvt. Ltd vs Cce, Mumbai Iii on 10 May, 2013
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. II
APPLICATION NO. ST/EH/92882/13
ST/S/1719/13
IN APPEAL NO. ST/571/11
(Arising out of Order-in-Appeal No. PKS/70/BEL/2011-12 dated 14.07.2011 passed by the Commissioner of Central Excise (Appeals), Mumbai III.)
For approval and signature: Honble Shri Anil Choudhary, Member (Judicial)
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 : CESTAT (Procedure) Rules, 1982 for Publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : yes of the order?
4. Whether Order is to be circulated to the Departmental : yes authorities?
M/s R.D. Engineers (I) Pvt. Ltd.
: Appellant
Versus
CCE, Mumbai III
: Respondent
Appearance Shri Prashant Kale, Accountant : For Appellant Ms. D.M. Durando, Dy. Commissioner (A.R.) : For Respondents CORAM:
Honble Shri Anil Choudhary, Member (Judicial) Date of Hearing : 10.05.2013 Date of Decision: 10.05.2013 ORDER NO.......................................................
Per: Anil Choudhary:
This appeal arises out of Order-in-Appeal No. PKS/70/BEL/2011-12 dated 14.07.2011 passed by the Commissioner of Central Excise (Appeals), Mumbai III, by which the order of adjudication dated 22.02.2011 was confirmed for recovery of Rs.91,216/- being allegedly wrong CENVAT credit taken and Rs.2,678/- for insurance as pointed by Audit Team, along with interest of Rs.13,101/- under Rule 14 of CENVAT Credit Rules, 2004 & further penalty was imposed of Rs.93,894/- under Section 11AC of the Central Excise Act, 1944 read with Rule 15 of the CENVAT credit Rules, 2004. Further amount of Rs.1,06,995/- deposited/debited by the appellant, was ordered to be appropriated against such CENVAT credit with interest. The appellant further informs that they have one common product for both the factories located one at Bhandup (Mumbai) and another at P.O. Sinner Dist. Nashik.
2. The appellant further informed that after their product is ready, being Catalyst Suspension Vessels which are tested by one common agency M/s Bureau Veritas India Pvt. Ltd. which carried out inspection services at both the premises at Sinner unit and Bhandup unit. It is further informed that the accounts of both the units although maintained separately but the financial control was at the head office at Bhandup and all the disbursements are made from Bhandup. Hence the suppliers of materials and services submit their bills at the Bhandup unit. As prayed early hearing is allowed, with the consent of both sides and stay with final hearing is taken up together.
3. The brief facts as per Show-cause notice are during the course of audit conducted by the Audit Team of Central Excise, Mumbai-III, of the records of appellant for the period 2007 to 2009, audit team detected that the appellant had availed input Service Tax credit amounting to Rs.91,216/- (Rs.88,560/- Basic, Rs.1,771/- Education Cess, Rs.885/- Secondary Higher Education) on the bills (testing charges of finished product) which were not pertaining to Bhandup unit but were pertained to their Nashik Unit. As per CENVAT Credit Rules, 2004, CENVAT credit on these services were not available in the Bhandup unit as the said services were rendered to their unit at Nashik. The commercial invoices/bills clearly shows that these services were pertaining to their Nashik unit and were not utilized directly or indirectly for the manufactured goods in their Bhandup unit and same were in admissible as the same pertains to their other unit at Nashik. Further, it was also detected that the appellant had availed Service Tax credit amounting to Rs.2,678/- (including education cess) vide credit Entry No. 241/Dec. 07 on the Service Tax paid on the insurance which is in the name of the companys Director. As per CENVAT credit Rules, 2004 credit on the Service Tax paid on insurance, which was in the name of Companys Director, were not utilized directly or indirectly for the manufactured goods. Since, they had availed credit of input Service Tax credit and failed to take necessary precaution before availing credit, and they had not disclosed these facts with intention to benefit them from wrongful credit and utilized the said amount for the payment of duty on their final product. If, it had not been detected by the Central Excise audit they would have benefited themselves financially, therefore, the appellant is liable for penal action under Rule 15(2) of CENVAT credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
3.1 The appellant accepted their mistakes as discussed above and paid Rs.91,216/- (including education cess) vide debit entry No. 347 dated 25.03.2010 RG 23 Part II and Rs.885/- vide debit entry No. 4 dated 25.03.2010 in their PLA account. They also paid the appropriate interest of Rs.12,319/- vide TR 6 Challan No. 01/31.3.2010. The appellant also paid Rs.2600/- + Rs.52 Edu. Cess vide RG Part II Entry No. 347 dated 25.03.2010 and SHE Cess of Rs.26/- vide PLA Entry No. 4 dated 25.03.2010 and interest of Rs.782/- vide TR 6 Challan No. 01/31.3.2010. Thereafter informed the Revenue Authority by filing copies of challan & relevant pages of PLA A/C. 3.2 In view of the above related facts, show-cause notice bearing No. V. Adj/SCN/BDN/RD/Eng/26/10- 112739-3741 dated 19.11.2010 was issued to appellant asking them to show cause as to why:
a) The amount of 91,216/- (including education cess) and Rs.2678/- (including education cess) should not be demanded and recovered from them along with appropriate interest under the Rule 14 of CENVAT credit Rules, 2004 read with proviso 1 to Section 11A of the Central Excise Act, 1944, and read with Section 11AB of CEA, 1944. The appellant already paid the said amount along with interest should not be appropriated;
b) A penalty should not be imposed upon them under the provisions of Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 for contravention of Rules 3 & 4 of CENVAT Credit Rules, 2004.
3.3 In response to the said notice the appellant vide their letter no. RDE/CEX/2010-11/66 dated 21.12.2010 replied to notice, wherein they inter alia stated that till date of debit, the balance was Rs.35,43,150/- in CENVAT account remained far more than the alleged wrong CENVAT credit. It was never their intention to avail the credit wrongly as though the said credit was admissible at Nashik factory, and there was no loss to Government. They debited the amount along with interest immediately after being pointed out by the Audit. They further stated that as regards Service Tax credit on the insurance premium in the name of Director, the insurance premium was paid by the company and said expenses were loaded in the value of final product and all expanses incurred in the factory on account of business of manufacturing excisable goods, which form part of the value of the final products are to be treated in or in relation to the manufacture of final product. They further submitted that there was no determination of duty under sub-section 2 of Section 11A, which is a paramount requirement for imposing penalty under Section 11AC, since there is no determination no penalty under Section 11AC is imposable. They clarified that it was a bona fide mistake and there was no deliberate intention to avail inadmissable credit.
4. The appellant have raised the following grounds before this Tribunal:-
i) The appellant had no intention to avail the CENVAT credit wrongly as though the said credit was not admissible at Bhandup factory. It is further argued by the appellant that Rule 3(1) of the CENVAT credit Rules, provides - The manufacturer or producers of final products is allowed to take credit of specified duty of Excise or Service Tax provided that CENVAT credit of such duty or tax is not available in respect of benefit of any exemption under Notification No. 1/11.
ii) Further the appellant reversed the credit taken by debit entry immediately and also paid interest vide TR 6 challan No. 01/31.3.2010. In view of the aforementioned, penalty under Section 11AC of Central Excise Act, 1944, have been wrongly imposed.
5. The learned Authorised Representative appearing for the Revenue reiterated the orders of the lower Court.
6. Section 73(3) of the Finance Act provides that where the Service Tax has not been levied or short paid or erroneously refunded, the assessee on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise officer, before service of notice on him under Section 73(1) in respect of such tax, may pay such tax before serving of notice (SCN) on him and also inform the Central Excise officer of such payment in writing. On such information, the concerned officer shall not serve any notice under Section 73(1) of the Act.
7. In view of this I find that the facts of the appellant are covered under Section 73(3) of the Act. The appellant had paid tax / reversed vide entry in register & paid interest by challans. Further proper intimation was also given, which is evident from the Show-cause notice. In this view of the matter, the penalty imposed of Rs.93,894/- under Section 11AC of Central Excise Act, 1944 is set-aside. Thus the appeal along with stay application are allowed in favour of appellant mentioned above.
8. Further the detention memo dated 28.01.2013 on the appellant, by Superintendent of Central Excise, Range-III, Bhandup Division is also set-aside, as annexed to application for early hearing.
9. Order be given dasti.
(Dictated and pronounced in open Court) (Anil Choudhary) Member (Judicial) Sp 7