Custom, Excise & Service Tax Tribunal
Ms Hi Tech Arai P Ltd vs Commissioner Of Gst&Amp;Cce(Madurai) on 5 October, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/41553 to 41555/2018
[Arising out of Order-in-Appeal No.MAD-CEX-OOO-APP-30 to 32-18,
dated 14.03.2018 passed by the Commissioner of Central Excise (Appeals),
Madurai]
M/s.HI TECH ARAI PVT. LTD. APPELLANT
Versus
COMMISSIONER OF GST AND CENTRAL EXCISE, RESPONDENT
MADURAI Appearance:
For the Appellant Ms. G. Vardini Karthick, Adv. For the Respondent Shri L. Nandakumar, AC (AR) CORAM:
Hon'ble Smt. Sulekha Beevi C.S, Judicial Member Date of hearing/decision 05-10-2018 FINAL ORDER NOs. 42571-42573 / 2018 The appellants are engaged in manufacture of Oil Seals, Moulded Rubber Products etc., and are availing the facility of Cenvat credit of duty paid on inputs, capital goods and service tax paid on input services based the invoices issued by the head office, which is registered as an Input Service Distributor. During the course of audit of accounts of appellants, it was noticed that their head office had distributed input service credit in violation of provisions of Rule 7 of Cenvat Credit Rules, 2004. As such, excess credit was distributed by the head office to the five Units of appellant-Company. The issues in these appeals arise out of violation noted in the case of three Units. The appellants reversed the credit which was so availed by them 2 E/41553 to 41555/2018/2018 irregularly on being pointed out by the department much before issuance of the show-cause notice. However, the department issued show-cause notice proposing to recover the wrongly availed credit along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. In appeal, the Commissioner (Appeals) upheld the same. Hence, the appellants are now before the Tribunal.
2. On behalf of the appellants learned counsel Ms. Vardini Karthick submitted that the appellants are contesting only the interest and penalty imposed by the authorities below. She argued that the appellants had reversed the credit before utilization. The appellants had sufficient credit balance in their cenvatable account during the disputed period and, therefore, the interest and penalty imposed cannot sustain. It is submitted by her that the period involved is Apr.'14 to Aug.'14. An amendment was brought forth by Notification No.21/04-CE (NT), dated 11.07.2014 so as to restrict the distribution of credit by head office on prorata basis. The period under dispute is a transition period and the appellants had distributed the credit on the bonafide belief that they are eligible for such distribution. She, therefore, pleaded to set aside the interest as well as penalties. It is also argued by her that in respect of two other Units by Order-in- Original No.68/17, dated 11.01.2018 and Order-in-Appeal No.215/17, dated 14.03.2018, the Commissioner (Appeals) had waived the penalties imposed.
3. The learned Authorised Representative Shri L. Nandakumar supported the findings in the impugned order. He submitted that the appellants by such method of distribution had availed excess credit. 3
E/41553 to 41555/2018/2018 Therefore, the demand raised is legal and proper. He also argued that the issue was unearthed only by Audit Officers and, therefore, the penalties imposed are legal and proper.
4. Heard both sides.
5. The appellants are contesting only demand of interest and penalties imposed. It is brought out from the facts as well as from the submissions made that they have reversed the credit before utilization and also that they had sufficient credit balance during the disputed period.
6. The present appeals pertain to three Units. For two other units for the same very issue, the Commissioner (Appeals) has waived the penalties. Discussion made by Commissioner (Appeals) for waiving penalties is noteworthy and is reproduced as below:-
"7.3 In view of Rule 12A[4] of the Cenvat Credit Rules, the credit taken by one Unit under LTU could be transferred to another Unit in LTU and, therefore, the turnover based distribution of ISD could be overcome by this special provision. It was only after issue of Notification No.21/2014-CE(NT), dated 11.07.2014 that this privilege was withdrawn. Further, it is also to be remembered that whatever amount was distributed as excess to the appellant's Unit resulted in equal reduction of credit passed on to the other Units of the appellant's-Company. This wrong distribution was caused by incorrect computation of turnover of the respective Units, but the net effect of it is revenue-neutral. Finally, I find that the appellant had accepted the mistake as soon as it was pointed out to them and reversed the excess credit in their ER-1 returns for December, 2015 and February, 2016 without even waiting for a show-cause notice. Further, proceedings with respect to interest have been dropped, as the appellant had sufficient unutilized credit. Considering the peculiar matrix of facts, change in law, co- operative conduct of the appellant and revenue-neutrality of the issue, I hold that the imposition of penalty under Rule 15 (2) of the Cenvat Credit is unjustified."
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E/41553 to 41555/2018/2018
7. Taking these aspects into consideration, I am of the view that applying the case law in M/s. Strategic Engineering Pvt. Ltd., (supra) the penalties imposed are required to be set aside. I am not interfering with the demand of interest. The impugned order is modified to the extent of waiving penalties and without disturbing the demand or the interest thereof.
8. Appeal is partly allowed in the above terms.
(Dictated and pronounced in open court) (SULEKHA BEEVI C.S) JUDICIAL MEMBER ksr 10-10-2018 5 E/41553 to 41555/2018/2018 DRAFT Remarks I II III Date of 05.10.2018 dictation Draft Order 08.10.2018
- Date of typing Fair Order 10.10.2018 Typing Date of 10.10.2018 number and date of dispatch 6 E/41553 to 41555/2018/2018