Custom, Excise & Service Tax Tribunal
M/S. Ind-Swift Laboratories Ltd vs Cce, Chandigarh-Ii on 24 November, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
SINGLE MEMBER BENCH
Court No.III
Appeal No. E/53056-53057/2014/Ex-SM
(Arising out of OIA No.96 & 97/Appl/Cus(D)CampChd/2013-14 dt.7.2.14 passed by CCE(A), Chandigarh)
Date of Hearing: 16.10.2015
Date of Order:24.11.2015
For approval & Signature:
Honble Smt.Sulekha Beevi C.S., Member (Judicial)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordships wish to see the fair copy of the order?
seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
M/s. Ind-Swift Laboratories Ltd. Appellant
Vs.
CCE, Chandigarh-II Respondent
Appearance:
Present for the Appellant: Shri Rupender Singh, Advocate Present for the Respondent: Shri R.K.Mishra, AR Coram: Honble Smt.Sulekha Beevi C.S., Member (Judicial) Final Order No.53510-53511/2015 Per: Sulekha Beevi C.S. The appeal is filed challenging the demand of interest on the credit wrongly taken and reversed before utilizing the same.
2. The appellant is engaged in manufacture of excisable goods falling under chapter 29, 30 and 33 of 1st Schedule of CETA, 1985. They are providing services under the category of scientific and technical consultancy, transport of goods by road (GTA) and Business Auxiliary service (commission paid outside India) for which appellants hold Service Tax Registration. The appellants were also availing cenvat credit facility of duty paid on inputs, capital goods, and input services. In the course of audit it was observed that appellant had wrongly taken credit on inputs amounting to Rs.4,47,827/-, but had subsequently reversed the same. The appellant was required to pay the interest of Rs.22,843/- from the date of wrongly taking credit to the reversal of the same. In response to the letter, the appellant intimated the department that the credit was wrongly taken in excess of the admissible credit during the period April, 2007 to December, 2007 due to mistake. But the same was debited by the month of March, 2008 as soon as it came to the notice and also that cenvat credit so taken was never utilized by them for payment of duty. That therefore no interest was payable. The department did not accept this view and issued a show cause notice dated 13.11.2009 proposing the demand of interest of Rs.22,843/- and imposition of penalty. The adjudication culminated in the Order-in-Original which confirmed the demand of interest and imposed equal amount of penalty. In appeal, the Commissioner (Appeals) vide impugned order upheld the same. Being aggrieved the appellant is before the Tribunal.
3. The learned counsel for appellant submitted that the credit taken was reversed very soon on coming to know of the mistake. As the credit taken was reversed before utilization, no interest is payable. He placed reliance on the following judgements:
1. CCE & ST, LTU, Bangalore vs. M/s.Bill Forge (P) Ltd. -2011-TIOL-799-HC-KAR-CX
2. CCE, Madurai vs. Strategic Engineering (P) Ltd.-2014 (310) ELT 509 (Mad.)
3. Gurmehar Construction vs. CCE, Raipur-2014 (36) STR 545 (Tri.-Del.)
4. Gestamp Sungwoo Automotive (Chennai) Pvt.Ltd. vs.CCE, Chennai-IV-2014 (36) STR 45 (Tri.-Chennai).
4. Against this, the learned AR Shri R.k.Mishra contended that as per Rule 14 of the Cenvat Credit Rules, 2004, the appellants were liable to pay interest even if credit was reversed before utilization. He placed reliance on the judgements rendered by Honble Apex Court in the appellants own case and reported in 2011(265) ELT 3 (SC). The other cases relied by the Revenue are CCE, Pune vs.G.L. & V India Pvt.Ltd.-2015 (321) ELT 611 (Bom.) and CCE, Chennai vs. Delphi TVS Diesel Systems Ltd.-2015 (322) ELT 279 (Mad.)
5. The period of dispute in the present case is April 2007 to December 2007. The appellants had wrongly taken the credit and had reversed the same on their own on coming to know of the mistake. The appellants thus have not taken any benefit of the wrong entry. The objection was raised in the course of audit and the department directed the appellant t opay interest from the date of taking credit, till the date of reversing the same. The appellants responded by stating that as the credit was reversed before utilization they are not liable to pay any interest.
6. At this juncture, it would be worthwhile to notice Rule 14 of Cenvat Credit Rules, 2004, as it stood during the relevant period:
Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded.-Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.
7. The issue that poses for consideration is whether interest is chargeable on the cenvat credit wrongly taken, though the same is reversed before utilization of the credit. The Honble Apex Curt in UOI vs. Indo Swfit Laboratories case (supra) held that interest is chargeable. The said decision has been discussed and referred in all the other judgements placed before me by either side. The Honble Karnataka High Court in the case of M/s.Bill Forge (P) Ltd. has made a detailed analysis and observed that the Honble Apex Court in Indo Swift Laboratories case was essentially concerned with the interpretation placed by the Punjab & Haryana High Court with regard to the words or appearing twice in Rule 14 of the Cenvat Credit Rules, 2004. The Honble High Court in the case of Bill Forge (P) Ltd. observed as under:-
20.. The assessee uses the credit to make payment of excise duty on excisable product. Instead of paying excise duty, the cenvat credit is utilized, thereby it is adjusted or set off against the duty payable and a debit entry is made in the register. Therefore, this is a procedure whereby the manufacturers can utilise the credit to make payment of duty to discharge his liability. Before utilization of such credit, the entry has been reversed, it amounts to not taking credit. Reversal of cenvat credit amounts to non-taking of credit on the inputs.
21.?Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax, there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly.
22.. In other words, once the entry was reversed, it is as if that the Cenvat credit was not available. Therefore, the said judgment of the Apex Court has no application to the facts of this case. It is only when the assessee had taken the credit, in other words by taking such credit, if he had not paid the duty which is legally due to the Government, the Government would have sustained loss to that extent. Then the liability to pay interest from the date the amount became due arises under Section 11AB, in order to compensate the Government which was deprived of the duty on the date it became due. Without the liability to pay duty, the liability to pay interest would not arise. The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable, the liability to pay interest would not arise.
8. Another judgement placed before me is the decision of the Honble High Court of Madras (Madurai Bench) in CCE, Madurai vs. Strategic Engineering (P) Ltd., dated 10.2.2014. In this judgement, the Honble Court has not only considered the decision in Indo Swift Laboratories case and the view taken in M/s.Bill Forge (P) Ltd. case but has also analyzed the subsequent amendment brought forth in Rule 14 of the Cenvat Credit Rules, 2004. The Honble High Court has observed therein as under:
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.
9. Prior to the above amendment, the word or used twice in Rule 14 created a confusion whether taking the credit itself would attract interest and penalty. The judgement rendered in M/s.Bill Forge case has discussed this aspect and held that interest is not chargeable on cenvat credit wrongly taken if it was reversed, before utilization. The Tribunal in the case of Gurmehar Construction vs. CCE, Raipur-2014 (36) STR 545 (Tri.-Del.) has analyzed various judicial pronouncements on the issue, and by its judgement dated 5.6.2014 has followed the ratio laid in M/s.Bill Forge (P) Ltd. case and held that interest is not chargeable on the cenvat credit which was taken and reversed before utilization.
10. On the other hand, the Revenue relies upon the judgements of the Honble Madras High Court in Delphi TVS Diesel Systems Ltd. (supra) decided on 31.1.2014, wherein the Honble High Court held that interest is chargeable even if the credit is reversed before utilization. The Honble Court therein relied upon its own decision rendered in CCE vs. Sundaram Fasteners Limited case decided one day before the decision made in Delphi TVS Diesel Systems Ltd. case. The Honble High Court was more inclinded to follow the dictum of Apex Court in Indo Swift Laboratories case and distinguished the judgement in M/s.Bill Forge (P) Ltd. case by saying that in M/s.Bill Forge (P) Ltd. case, the court was examining the issue of reversal of credit where the assessee claimed benefit of exemption notification.
11. The other decision relied by Revenue is the judgement of the Honble High Court of Bombay in CCE vs. GL & V India Pvt.Ltd., dated 27.4.2015. But this is a case where the assessee had taken suo motto credit and reversed the same before utilization of the credit. The Honble High Court therein followed the dictum laid in UOI vs. Ind Swift Laboratories Ltd. case and the case of M/s.Bill Forge (P) Ltd was distinguished on facts. The Honble High Court was not persuaded by the decision of the Honble Madras High Court in CCE, Madurai Vs. Strategic Engineering (P) Ltd.
12. From the above discussion, it is seen that there are judgements of various High Courts which have taken different views referring to the Honble Apex Court judgement in the case of Indo Swfit Laboratories case. I find that the Honble High Court of Madras in Strategic Engineering (P) Ltd. has not only analysed the judgement laid in Ind Swift Laboratories case and M/s.Bill Forge (P) Ltd. case, but has also gone one step further by considering the subsequent amendment brought forth in Rule 14 of Central Excise Rules, 2004. This Tribunal in the case of Gurmehar Construction Vs. CCE, Raipur dated 5.6.2014 followed the judgeent in M/s.Bill Forge (P) Ltd. case. In this background of judicial dispositions on the issue, I am inclined to follow the judgement laid by Honble High Court of Karnataka in the case of M/s.Bill Forge (P) Ltd. which has been endorsed by the Honble High Court of Madras in Strategic Engineering (P) Ltd. case.
13. From the foregoing, I hold that interest is not chargeable on the credit wrongly taken which was reversed before utilization.
14. In the result, the impugned order is set aside and the appeals are allowed.
(pronounced in the open court on 24.11.2015) (Sulekha Beevi C.S.) Member (Judicial) mk 7