Custom, Excise & Service Tax Tribunal
Cce, C & St, Tirupati vs M/S Amara Raja Electronics Ltd on 27 July, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No. E/26725/2013 (Arising out of Order-in-Appeal No. 05/2013 (T) CE dt. 07.03.2013 passed by CCE, C & ST (Appeals), Guntur) For approval and signature: Honble Madhu Mohan Damodhar, 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 should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? CCE, C & ST, Tirupati ..Appellant(s) Vs. M/s Amara Raja Electronics Ltd., ..Respondent(s)
Appearance Sh. Arun Kumar, Authorised Representative for the Appellant.
None for the Respondent.
Coram:
Honble Madhu Mohan Damodhar, Member (Technical) Date of Hearing: 27.07.2016 Date of Decision: 27.07.2016 FINAL ORDER No._______________________ [Order per: Madhu Mohan Damodhar] Brief facts of the case are as follows:
M/s Amara Raja Electronics Ltd., (the respondent/assessee), are engaged in the manufacture and clearances of Home UPS/Trickle charge/Modules falling under chapter sub-heading No.85041090 of the Central Excise Tariff Act, 1985. During the verification of the records, it was noticed that the respondents have availed CENVAT credit of service tax paid on the service tax group resource sharing expenses under the category of Business Auxiliary services and Business Support Services as Input Services on the basis of the invoices issued by their sister concern i.e. M/s Amara Raja Batteries Ltd., Karakambadi and M/s Mangal Precision Products Ltd (ARBL and MPPL). The total CENVAT credit availed during the period from April, 2009 to February, 2011 was Rs.31,11,108/- and an amount of Rs. 8,68,833/- was similarly availed during the period from March, 2011 to December, 2011. The respondents were having an understanding with their two sister concerns i.e., M/s Amara Raja Batteries Ltd., and M/s Mangal Precision Products Ltd., for sharing of common expenses incurred at the common branch offices and the invoices appeared to be raised by ARBL and MPPL merely to collect expenses shared by them. No service appeared to be rendered by ARBL and MPPL, and no service received by the respondent. Hence, in the absence of relationship of service provider and service recipient, the invoices raised by ARBL and MPPL appeared to be not valid invoices and were merely raised to collect expenses shared by them. These appeared to the department to be mere commercial transactions, where some common expenditure between both the group companies were shared in between and thus did not appear to qualify as input service as defined under Rule 2(l)(ii) of CENVAT Credit Rules, 2004. Hence, two show cause notices dated 29-12-2011 and 29-02-2012 were issued to the respondent.
2. On adjudication, the adjudicating authority vide his Adjudication Order No. 33 & 34/2012-Adjn (CE) ADC dated 27-03-2012, held as follows:
With reference to SCN dated 29.12.2011 (period April, 2009 to February, 2011), the adjudicating authority confirmed the demand and ordered for recovery of Rs. 31,11,108/- irregularly availed CENVAT Credit on the common sharing expenses during the period from April, 2009 to February, 2011, appropriated an amount of Rs. 8,97,023/- + interest Rs. 54,949 which was reversed/paid by respondent on 01.12.2009 and imposed equal penalty of Rs. 31,11,108/- under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
With reference to SCN dated 29.02.2012 (period March, 2011 to December, 2011), the adjudicating authority confirmed and ordered the recovery of irregularly availed / utilized CENVAT Credit amounting Rs. 8,68,833/- involving common sharing expenses during the period from March, 2011 to December, 2011 with interest thereon, imposed penalty of Rs. 2,00,000/- under Rule 15(1) of CENVAT Credit Rules, 2004.
3. Aggrieved by these orders, the appellant filed appeals before the Commissioner (Appeals) who vide Order-in-Appeal dated 07.03.2013, upheld the demands in respect of the period March 2011 to December, 2011; however in respect of the demands in respect of period April, 2009 to February, 2011 while not interfering with the tax demand of Rs. 31,11,108/-, reduced the penalty imposed under Rule 15 read with section 11AC ibid from Rs. 31,11,108 to Rs. 22,14,085/- on the grounds that the assessee had reversed amount of Rs. 8,97,023/- with interest at the instance of audit party before issue of SCN.
4. The department has come in appeal against aforesaid order of Commissioner (Appeals).
5. The department was represented by Sh. Arun Kumar, Learned AR who reiterated the grounds of appeal, and also submitted as follows:
i) Respondent assessee had been availing irregular CENVAT Credit of Service tax. This is not disputed in the impugned order.
ii) Since the said irregular availment of credit had been done by suppression of facts from Department, provisions of section 11A (2B) of the Act would not be applicable.
iii) Commissioner (Appeals) had also found that the assessee had not informed the Department regarding the availment of such credit.
iv) Hence equal penalty under section 11AC is very much required to be imposed in this case.
6. None appeared for the Respondent assessee.
7. Have gone through the facts and records of the case and also the submissions of the Learned AR. The issue that comes up for decision is whether the order of Commissioner (Appeals) reducing the penalty under Rule 15 for period April 2009 to February 2011, read with Section 11AC, as aforesaid is correct in law.
8. For better analysis of the issue at hand, it would be worthwhile to reproduce the relevant provisions of Section 11A (2B) of the Central Excise Act, 1944 as it stood during the impugned period before it was amended with effect from 08.04.2011:
(2B) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty, on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid:
Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.
Explanation 1. Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty.
9. The aforesaid provisions undoubtedly constitute a beneficial piece of legislation with the intention of reducing litigation and encouraging timely payment by the assessee of any duty short paid or short levied, etc., on his own realization or on being pointed out by the department officer and by making such recompense shall have the beneficial effect of dispensing with issue of show cause notice to him. From the provisions however, it is seen that this facilitation will be available only to those assesses who come with clean hands. The Explanation 1 to Section 11A(2B) ibid clearly disbars the aforesaid option to those cases where the duty was not levied /short levied, not paid/short paid etc., on account of fraud, collusion or any wilful misstatement or suppression of facts. Once these adverse factors are present, the shall not serve any notice provision will not apply. By implication, a show cause notice will have to be issued, and since, any of the aspects of fraud, collusion, wilful misstatement or suppression of facts are present, such notice shall necessarily attract the provisions of S 11AC of the Act which mandates penalty equal to the duty not levied /short levied, not paid/short paid etc.
10. From the facts of the case at hand, it is not disputed that the Commissioner (Appeals) has upheld the adjudicating authoritys finding that the details of the input service credit availed and utilized have come to the knowledge of the department only on verification of accounts and that there is no evidence on record to support the claim of the assessee that it had submitted all details of such invoices to the department. When the said appellate authority is satisfied that it is a clear case of suppression of material facts, he cannot then go beyond the intention of the legislature in Explanation 1 to Section 11A (2B) ibid, and will necessarily have to uphold imposition of penalty equal to duty as mandated for such situations in Section 11AC ibid. The action of the Commissioner (Appeals) reducing the penalty under Rule 15 read with Section 11AC ibid for the period April 2009 to February 2011, trangresses the legal provisions as applicable during that period. Hence that portion of the impugned order reducing the penalty amount of Rs. 31,11,108/- to Rs. 22,14,085/- for the period April, 2009 to February, 2011 is set aside and the order of adjudicating authority imposing penalty equal to duty demanded will stand restored.
11. The impugned order is not interfered in any other manner. Departmental appeal allowed as above.
(Operative part of this order was pronounced in court on conclusion of the hearing) (MADHU MOHAN DAMODHAR) MEMBER (TECHNICAL) Jaya.
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