Custom, Excise & Service Tax Tribunal
Pune - I vs Birla Corporation Ltd on 12 January, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO: E/2499/2010 [Arising out of Order-in-Appeal No: PI/136/2006 dated 10/04/2006 passed by the Commissioner of Central Excise (Appeals), Pune - I.] For approval and signature: Hon'ble Shri S.K. Gaule, 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? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes Commissioner of Central Excise Pune - I ...Appellant Vs Birla Corporation Ltd. ...Respondent
Appearance:
Shri S.M. Vaidya, Authorised Representative (JDR) for the appellant Ms. Charanya Lakshmikumaran, Advocate for the respondent CORAM:
Hon'ble Shri S.K. Gaule, Member (Technical) Date of decision: 12/01/2011 ORDER NO: ____________________________ Heard both sides.
2. Revenue is in appeal against the Order-in-Appeal No: PI/136/2006 dated 10/04/2006 whereby the Commissioner (Appeals) has upheld the adjudicating authority's order insofar as it related to confirmation of duty along with interest but set aside the penalty imposed under Section 11AC of the Central Excise Act, 1944.
3. The brief facts of the case are that the respondent are engaged in the manufacture of goods falling under Heading 8708 00 of the First Schedule to the Central Excise Tariff Act, 1985 and are availing CENVAT facility. The department on scrutiny of various records has found that the respondent had issued debit notes to their supplier of inputs on account of rejection of inputs against which they have availed CENVAT credit. The department initiated proceedings against the respondent. The adjudicating authority confirmed the demand of CENVAT credit of Rs. 33,955/- along with interest. The adjudicating authority also imposed penalty of equal amount under Section 11AC of the Act. Aggrieved by the same the respondent filed appeal before the Commissioner (Appeals) who while relying upon the decision of Larger Bench in the case of Commissioner of Central Excise vs. Machino Montell (I) Ltd. 2004 (168) ELT 466 set aside the penalty under Section 11AC on the ground that CENVAT credit amounting to Rs. 33,955/- was paid even before the issuance of the show-cause notice. Revenue filed appeal against the Commissioner (Appeals) and this Tribunal vide its order No. A/1034/C-IV/SMB/07 dated 05/07/2007 upheld the Commissioner (Appeals) order. The department challenged this order before the Hon'ble Supreme Court. The Hon'ble Supreme Court remanded the case while deciding case of M/s. Dharmendra Textile Processors and Ors remanded this case to the Tribunal for its disposal in the light of the said decision.
4. The contention of the Revenue is that the case was earlier decided and penalty under Section 11AC was set aside relying upon the Larger Bench decision in the case of Machino Montell (I) Ltd. (supra) by both the authorities, the Commissioner (Appeals) and this Tribunal. Hon'ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processors 2008 (231) ELT 3 (SC) has held that penalty under Section 11AC is mandatory penalty and there is no scope for discretion under Section 11AC even if the duty is paid prior to show-cause notice. The learned JDR pointed out that the merits of the case were never been in dispute. Therefore, penalty is required to be imposed under Section 11AC in terms of apex court's judgment in the case of Dharmendra Textile Processors (supra) and subsequent decision of the Supreme Court in the case of Union of India vs. Rajasthan Spinning and Weaving Mills 2009 (238) ELT 3 (SC). Therefore, the learned Commissioner (Appeals) order is not sustainable in law and the same is required to be set aside and the appeal be allowed insofar as imposition of penalty under Section 11AC is concerned.
5. The contention of the respondent is that they have filed Cross-Objection received by the Registry on 27/06/2008. The contention is that the impugned order is not correct in law as well as on facts. Their contention is that it is not correct on the part of the Commissioner (Appeals) to record a finding that they did not dispute the case on merits. There was no suppression and as soon as the department pointed out the defects in the credit involved they have paid the differential amount. They placed reliance on the decision of the Hon'ble Bombay High Court in the case of Commissioner of Central Excise vs. Greaves Cotton Limited 2008 (225) ELT 198 wherein it has been held that penalty is not imposable where the assessee has not suppressed that CENVAT credit was not reversed to the extent of shortage.
6. Learned JDR in his rejoinder submitted that cross-objection requires to be filed within 45 days from the receipt of the appeal memo by the respondent and the respondent have not filed the cross-objection within the time limit prescribed under Section 35B of the Central Excise Act, 1944. Therefore, the same should not be taken into account and the findings of the Commissioner (Appeals) that the respondent have not disputed the case on merits should be taken note of and the appeal of the department be allowed in view of the Hon'ble Supreme Court's decision.
7. Alternatively, the learned counsel for the respondent submitted that since they have deposited the entire duty amount before issuance of the show-cause notice and, therefore, they are liable to pay only 25% of the duty amount as penalty as held in the case of K.P. Pouches (P) Ltd. vs. Union of India 2008 (228) ELT 31 (Del.).
8. I have perused the records and considered the submissions. Admittedly, the respondent have paid the duty in respect of the debit notes issued to the supplier of the goods and at no stage they have disclosed this aspect to the department. The show-cause notice was issued on the ground that the assessee has recorded the transaction by raising a debit note thereby suppressing the fact of rejection from the department. From para 4 of the Commissioner (Appeals) order, it is clear that they have not disputed the case on merits. Para 4 of the Commissioner (Appeals) order is reproduced hereunder for convenience of reference:
"4. I have carefully considered the impugned Order-In-Original, grounds of appeal and submissions made during the Personal Hearing. I find that merits of the case are not disputed. The appellants have paid duty of Rs. 33,955/-. The appellants are only disputing the penalty of Rs. 33,955/- imposed under Section 11AC and interest of Rs. 15,377/-. I find that the appellants case is covered by the Tribunal's Larger Bench decision in the case of CCE, Delhi III, Gurgaon vs. Machino Montell (I) 2004 (168) ELT 466 (CESTAT- LB) where it has been held that when the duty is paid before the issue of show-cause notice, the question of levy of penalty under Section 11AC does not arise. I find that in the present case duty was debited on 2.5.2005 where as show-cause notice has been issued on 19.08.2005. The ratio of the decision is therefore squarely applicable in the present case. The imposition of penalty of Rs. 33,955/- under Section 11AC is set aside. However, the appellants are liable to pay interest of Rs. 15,377/- as the period under dispute is after 12.5.2001 i.e. after enactment of amended Section 11AB. The duty demand of Rs. 13,680/- and recovery of interest of Rs. 15,377/- is upheld."
8.1 The only ground on which the learned Commissioner (Appeals) has set side the penalty under Section 11AC was based on the decision of the Larger Bench in the case of Machino Montell (I) (supra). The Hon'ble Supreme Court in the case of Dharmendra Textile Processors (supra), which has been further clarified in the case of Rajasthan Spinning & Weaving Mills, has held that where charges of suppression are proved there is no discretion to reduce the penalty. I do not find that the appellant have challenged the confirmation of demand on the basis of suppression of facts. Therefore, the mandatory penalty under Section 11AC is imposable. As regards the cross-objection filed by the respondent is concerned, I find that the same has not been filed within the time limit prescribed, therefore, the same has to be rejected as such. The Commissioner (Appeals)' order setting aside the penalty under Section 11AC is not sustainable and hence, set aside to the extent.
8.2 As regards the contention of the respondent that since they have already paid the entire amount of duty involved in the case before the issuance of the show-cause notice they are liable to pay only 25% of the duty amount as penalty in view of the judgment of the Hon'ble Delhi High Court in the case of K.P. Pouches (P) Ltd. vs. Union of India (supra). I find that this judgment of the Hon'ble Delhi High Court and to give option to the respondent was not before the lower authorities. Therefore, the case is remanded to the lower adjudicating authority for the limited extent to decide the quantum of penalty under Section 11AC after taking into account the judgment of the Delhi High Court in the case of K.P. Pouches (P) Ltd. (supra). Needless to say, reasonable opportunity of hearing may be granted to the respondent.
9. The appeal disposed of by way of remand. The cross-objection filed by the respondent also disposed of as above.
(Dictated in Court) (S.K. Gaule) Member (Technical) */as ??
??
??
??
8 8