Custom, Excise & Service Tax Tribunal
Cce, Chennai vs M/S. Premier Mills Ltd on 22 May, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/110/06
(Arising out of Order-in-Appeal No. 95/05 (M-III) dated 31.10.2005 passed by the Commissioner of Central Excise (Appeals), Chennai).
For approval and signature
Honble Shri P. KARTHIKEYAN, Member (Technical)
_________________________________________________
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CCE, Chennai : Appellant
Vs.
M/s. Premier Mills Ltd. : Respondents
Appearance Shri M.K.A.K. Mohiddin, JDR, for the appellant Shri K. Sathiyamoorthy, GM (P & A), for the respondent CORAM Mr P. KARTHIKEYAN, Member (Technical) Date of hearing : 22.05.08 Date of decision : 22.05.08 Final ORDER No.________/2008 M/s. Premier Mills Ltd. (PML), Hosur, had wrongly availed Cenvat credit to the tune of Rs. 1,89,912/- during the period October, 2002 to December, 2003. They reversed the inadmissible credit before Show Cause Notice was issued to recover the same. After due process of law, vide order dated 30.11.04, the original authority imposed a penalty of Rs.17,746/- on PML in terms of Rule 13 of Cenvat Credit Rules, 2002 (CCR). He demanded interest of Rs. 17,746/- as proposed in the show cause notice. In the impugned order, the Commissioner vacated the demand of interest as well as the penalty imposed on PML. He found that in view of the apex Courts decision in Commissioner Vs Rashtriya Ispat Nigam Ltd [2004 (161) ELT (0285)] the settled position as regards the demand of interest and imposition of penalty when the duty not paid had been paid before the issue of show cause notice was that the penalty was not imposable and the demand of interest was not legal. He also found that in the case of M/s.Pooja Forge Ltd., Vs. CCE Faridabad reported in 2004 (177) ELT 302 (Tri.-Del.), the Tribunal had held that no penalty could be imposed and interest demanded in a case where there was no short payment or non-payment of duty.
2. The Revenue is in appeal against the order of the Commissioner (Appeals) in setting aside the demand of interest and the penalty imposed on PML. The main ground taken by the Revenue in the appeal is that Rule 12 of the CCR provided that credit wrongly taken can be recovered along with interest and provisions of Section 11 AB applied mutatis mutandis. Rule 13 of CCR provided penalty for violation of the rules. In the instant case PML had belatedly reversed the credit wrongly availed. The impugned order was incorrect in view of the above statutory provisions and the order of the original authority deserved to be restored. The Ld. JDR reiterates the grounds taken in the appeal relying on the judgment of the Apex court in the case of Sony (I) Ltd. Vs. CCE, Delhi reported in 2004 (167) ELT 385 (S.C.). In the said case, considering the facts of the case, the Apex Court found no justification for interference with the order of the authorities imposing penalty equal to duty. In the instant case, the inadmissible credit was reversed only at the instance of the department. The payment was not voluntary and therefore reliance by the Commissioner on the ratio of Rashtriya Ispat Nigam Ltd case was misplaced. The leniency shown by the lower appellate authority encouraged unauthorized removal of excisable goods and emboldened unscrupulous assessees to indulge in activities contrary to law. Blanket protection could not be extended from penalty in cases where duty was paid before the issue of show cause notice.
3. The authorized representative of the respondents submits that the excess credit of above Rs. 1.89 lakhs was wrongly availed by PML owing to system error. Once the error came to their notice, the wrong credit was reversed even before the issue of show cause notice. In the light of the decision of the Apex Court in Rashtriya Ispat Nigam Ltd. case, they were not liable to pay any interest nor had incurred liability to penalty. It is submitted that the assessee pays duty of around Rs. Seven crores a year and utilizes cenvat credit to the tune of around Rs.4.5 crores.
4. I have carefully considered the facts of the case and the rival submissions. There is no dispute that the assessee reversed the excess credit immediately on the same being noticed. The irregular availment occurred in respect of one of the several duties levied but not specified for availing cenvat credit under different acts on a Bill of Entry. Considering the figures of duty paid and cenvat credit availed annually, I do not find any reason to believe that the assessee knowingly indulged in unauthorized availment of cenvat credit of less than Rs.Two lakhs. I have also perused several judicial authorities cited by both sides for canvassing their respective cases. The revenue has cited the decision of the Larger Bench of the Tribunal in CCE Vs. Ilpea Paramount Pvt. Ltd., reported in 2007 (213) ELT 500 (Tri.-LB), wherein it was decided that in a case where evasion by fraud was found, equal penalty had to be mandatorily imposed and duty not paid had to be demanded with interest. In the case of Sony (I) Ltd. Vs. CCE (supra), where facts were that fraudulent evasion was persevered in by the assessee for a long time, the Supreme Court refused to interfere with the decision of the lower authorities imposing equal amount of penalty. Assessee relied on the following decisions. In CCE Vs. Multiserve Rolls Ltd., reported in 2007 (215) ELT 119 (Tri.- Kol.), a case where modvat credit was wrongly availed but not utilized, the Tribunal upheld waiver of penalty imposed. In Bhiwani Textile Mills Ltd. CCE, New Delhi reported in 2003 (151) ELT 365 (Tri.-Del.), it was held that mandatory penalty could not be imposed for wrong availment of modvat credit.
5. The Apex Court in Rashtriya Ispat Nigam Ltd. case, upheld non-imposition of penalty and waiver of interest where the duty not paid was paid before issue of show cause notice. In the instant case, there is nothing on record to disbelieve the assessees claim that the excess credit was taken owing to error. Penalty need not be imposed just because statute provides for the same. Penalty need be imposed only in cases of dishonest or contumacious conduct of the assessee in defiance of law. In Hindustan Steel Ltd. Vs. State of Orissa - 1978 (2) E.L.T. (J 159) (S.C), the Honble Apex Court observed as follows :
The discretion to impose a penalty must be exercised judicially. A penalty will ordinarily be imposed in cases where the party acts deliberately in defiance of law, or is guilty of contumacious or dishonest conduct, or acts in conscious disregard of its obligation; but not, in cases where there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
6. Section 11AB provides for recovery of interest. Section 11AB reads as under:
Where any duty of excise has not been levied or has been short levied or short paid or erroneously refunded, the person who is liable to pay the duty as determined under sub-section (2) or has paid the duty under Section (2B), of Section 11A, shall, in addition to the duty, be liable to pay interest at such rate not below (ten percent) and not exceeding thirty-six percent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act. The Section covers cases of short payment / non payment of duty or erroneous refund determined under Section 11A or ascertained by the assessee, and made good with delay. In the instant case, the assessee did not utilize the excess credit availed as they always had about Rs. Three lakhs in their RG23A account during the material period. In the instant case therefore, there was no financial accommodation enjoyed by the appellant which had to be paid back to revenue along with compensation in the form of interest. Therefore, there is no justification in demanding interest from the assessee. I find that the lower appellate authority rightly vacated the penalty imposed on the assessee and the demand of interest. Therefore, the appeal filed by the revenue is devoid of merit. The appeal is dismissed.
(Dictated and pronounced in open Court) (P. KARTHIKEYAN) MEMBER (T) BB 2