Custom, Excise & Service Tax Tribunal
M/S. Hinduja Foundries Ltd vs Cce, Chennai on 7 March, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/41013/2014
(Arising out of Order-in-Appeal No. 12/2014 (M-I) dated 10.02.2014 passed by the Commissioner of Central Excise (Appeals) , Chennai).
M/s. Hinduja Foundries Ltd. : Appellant
Vs.
CCE, Chennai : Respondent
Appearance Shri M. Kannan, Adv., for the Appellant Shri R. Subramanian, AC (AR), for the Respondent CORAM Honble Shri P. K. Choudhary, Judicial Member Date of Hearing : 07/03/2016 Date of Pronouncement: 07/04/2016 FINAL ORDER No. 40587 / 2016 The adjudicating authority has confirmed the demand of Rs.3,10,792/- alongwith interest and penalty and appropriated the amount already paid towards demand of duty;. The appellant company has availed ineligible cenvat credit on capital goods and service tax credit. The present appeal is against the levy of interest and imposition of penalty.
2. The Ld. Counsel appearing on behalf of the appellant company Shri M. Kannan, Advocate submits that the period involved in this appeal is from 30.04.2009 to 31.08.2010 in respect of service tax and 28.01.2010 to 13.02.2011 in respect of capital goods. He further submits that they are only contesting the interest and penalty and though they have availed the credit but not utilized the same. He further submits that they had inadvertently availed excess capital goods credit to the extent of Rs. 2,98,747/- in as much as they have availed credit for the entire excise duty paid on capital goods instead of availing 50% of the duty paid as per Rule 4 (2)(a) of Cenvat Credit Rules, 2004. He submits that credit of Rs.12,045/- was availed wrongly on 30.04.2009 based on the invoice No. 53 dated 10.10.2006, even while there was no service tax payment under the said invoice. He vehemently mentions that they have reversed the credit of Rs. 12,045/- in respect of availement of cenvat credit and submits that the credit amount of Rs.2,98,747/- and Rs. 12,045/- having not been utilized and hence there is no liability to pay interest. He further points out that in any case they are eligible for the balance 50% credit relating to the capital goods on 01.04.2010 and therefore liability of interest has to be only for the period from 28.01.2010 to 31.03.2010. He relied on the following case laws in support of his contentions:-
1. CCE, Madurai Vs. Strategic Engg. (P) Ltd., 2014 (310) ELT 509 (Mad.)
2. CCE, Mumbai I Vs. Bombay Dyeing & Mfg. Co. Ltd.
2007 (215) ELT 3 (S.C.)
3. CCE, Meerut-II Vs. Rana Sugar Ltd.
2010 (253) ELT 366 (All.)
3. The Ld. AR, Shri R. Subramanian, AC, submits that M/s. Hinduja Foundries Ltd. had wrongly availed the cenvat credit of Rs. 2,98,747/- as input credit for the capital goods by contravening the provisions of Rule 4 (2) (a) of CCR, 2004. Even though they wrongly availed the credit they reversed it but they did not pay any interest, which worked out to Rs. 40,646/-. He also mentions that as pre Rule 14 of the CCR, 2004, interest is recoverable when cenvat credit is taken or utilized wrongly. He refers to the Boards Circular No. 897/17/09-CX dated 03.09.2009, wherein the Board has clarified that interest shall be recoverable when credit has been wrongly taken even if it has not been utilized in terms of Rule14 of CCR.2004.
4. Heard both sides in the matter. The only point for contest is the applicability of interest and imposition of penalty. During the course of hearing, the Learned Advocate submitted that they are not contesting the eligibility of credit.
5. Both sides have relied upon various judgments in their favour. The submission of the Learned Counsel that they had only availed the credit but not utilized the same is an assertion without any documentary proof. The judgment of the Madras High Court in the case of Strategic Engineering (P) Limited, reported in 2014 (310) ELT 509 (Mad) covers the issue on hand. Para 11 of the said judgment is extracted below:
11.?It is an admitted fact that Rule 14 of the Cenvat Credit Rules as been subsequently amended, wherein it has been clearly stated as taken and utilised. Therefore, it is quite clear that mere taking itself would not compel the assessee to pay interest as well as penalty. Further, as pointed out earlier, the subsequent amendment has given befitting answer to all doubts existed earlier. Since, the subsequent amendment has cleared all doubts existed earlier in respect of Rule 14 of the said Rules, it is needless to say that the argument advanced by the learned counsel appearing for the appellant/Department is erroneous, whereas the argument advanced on the side of the respondent is really having merit and the substantial questions of law settled in the present Civil Miscellaneous Appeal are not having substance and altogether the present Civil Miscellaneous Appeal deserves to be dismissed.
6. However, in the absence of documentary proof, the matter needs to be remitted back to the Adjudicating Authority before whom the appellant must prove that there has only been availment and no utilization. The adjudicating authority shall re-decide the issue based on the judgment of the High Court, supra. Needless to mention that the authority shall also follow the principles of natural justice. If on perusal of the documents it is found that there has been only availment and no utilization, the levy of interest is unsustainable.
7. With regard to penalty, it appears that the mistake is purely of a clerical nature for which the appellant should not be penalized. There is nothing on record to prove the malafide which is an essential requisite for the imposition of penalty under Rule 15 (2) of the CENVAT Credit Rules read with Section 11AC of the Central Excise Act. For ready reference the said provision is extracted below:
(2)?In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Excise Act, or of the rules made thereunder with intent to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of [clause (c), clause (d) or clause (e) of sub-section (1) of section 11AC of the Excise Act.] The penalty imposed is therefore set aside.
8. The appeal is allowed by way of remand to the adjudicating authority on the above terms.
(Order Pronounced in the open court on 07/04/2016) (P.K. CHOUDHARY) Judicial Member BB 5