CENVAT - Manipulation of Gate Register - Availment of Credit without goods being brought into factory - conduct shows guilty mind - Explanation to s. 11A(2B) comes into play and, therefore, reversal of credit would not help - respondent liable to interest: CESTAT
By TIOL News Service
MUMBAI, DEC 10, 2013: THIS is a Revenue appeal filed against the order passed by the Commissioner (Appeals).
The respondent assessee filed a COD application seeking condonation of delay of about four years in filing the cross-objection on the ground that the file was misplaced by the dealing official.
Holding that the explanation given is highly unsatisfactory, the Bench dismissed the COD application and accordingly the Cross Objection.
The facts of the case go thus - The respondent took CENVAT Credit of CVD amounting to Rs.30,56,260/- in respect of goods purportedly imported vide Bill of Entry without receipt of the goods in their factory. However, in the Gate Register maintained at the factory, entries were made showing the receipt of the goods on 30.6.2001. The goods were imported on 20.7.2001 and the consignment left Mumbai on 21.7.2001 to their customer M/s. Dhanlaxmi SSK Niyamit, Belgaum as per the container transport consignment note dated 21.7.2001. However, the appellant took credit of CVD paid on the said imported goods on 31.10.2001.
This was noticed by the Preventive Staff on scrutiny of the records. The authorized officials in the company admitted these facts and stated that M/s Dhanlaxmi SSK Niyamit, Belgaum had placed order on the respondent for a sugar mill plant and the machinery required for the said plant was imported by the respondent from Sweden and the same was sent directly to the customer. However, they took credit of CVD paid on the said machinery. Thereafter, they reversed the credit on 27.12.2001.
SCN was issued in this regard by the jurisdictional authorities.
Inasmuch in the adjudication proceedings the allegations leveled in the SCN were confirmed and penalties and interest were also imposed.
The Commissioner (A) held that since the entire credit has been reversed before issuance of SCN, interest u/s 11AB and penalty u/s 11AC of the CEA, 1944 are not sustainable.
This is what led to the Revenue taking the matter to the CESTAT.
The Revenue representative submitted that the respondent had resorted to fraud by taking credit without receipt of the goods into the factory and also by manipulating the private records such as Gate Register to show receipt; in spite of knowing that the goods were not meant for respondent's use and the goods were not received in the respondent's factory, the respondent still availed the CENVAT Credit of the CVD paid on the imported goods; that this conduct on part of the appellant clearly reveals their mala fide intention to avail ineligible credit and therefore, the provisions of Sections 11A(2B) of CEA, 1944 would not apply in such circumstances. It is also submitted that non-utilization of credit by the respondent would not obliterate the liability to pay interest on the wrong taking of credit. Reliance is placed on the decisions in CCE, Delhi-III vs. MachinoMontell (I) Ltd. - (2006-TIOL-276-HC-P&H-CX), Ind-Swift Laboratories Ltd. - (2011-TIOL-21-SC-CX), to submit that the order of Commissioner (A) be set aside to the extent of non-imposition of penalty and interest in terms of section 11AC and 11AB respectively.
The respondent submitted that it is a case of irregular taking of credit and since they had not utilized the credit, no loss has been caused to exchequer and, therefore, penal liability would not be attracted. Reliance is placed on the decisions in Steelco Gujarat Ltd. Vs. UOI - (2012-TIOL-572-HC-MUM-CUS), Bombay Dyeing & Mfg. Co. Ltd. (2007-TIOL-115-SC-CX) and Bill Forge Pvt. Ltd. (2011-TIOL-799-HC-KAR-CX). However, it is conceded that the appellant is liable to pay interest and their contention is only in respect of imposition of penalty.
The Bench extracted the provisions of section 11A(2B) of the CEA, 1944 and observed -
“6.1 …A plain reading of the above section clearly shows that where duty has not been levied or paid short-levied or short-paid by reason of fraud or collusion or any willful misstatement or suppression of facts, then the provisions of Section 11A(2B) will not apply.
6.2 In the present case, manipulation of the Gate Register by the respondent, consignment of goods directly to M/s Dhanlaxmi SSK Niyamit, Belgaum without bringing the same into their factory and the fact that the goods were never meant for use in the respondent's factory and was meant for supply to M/s Dhanlaxmi SSK and the statements given by the authorized signatory and the Accountant of the respondent firm clearly evidence the fact that the appellant, knowing fully well that they are not eligible to take the credit, has taken ineligible credit deliberately. If the department had not investigated the matter, this wrong availment of credit would have gone unnoticed. It is only after pointing out by the department, the respondent has reversed the credit that of without paying any interest thereon. The entire conduct of the respondent clearly shows a guilty mind and intent to evade duty by manipulation of books of account and also by taking ineligible credit. Therefore, Explanation to Section 11A(2B) comes to play and hence, the reversal of credit by the respondent would help the case at all and the respondent is liable for the interest liability as well as the penal consequences.”
The Bench distinguished the case laws cited by the appellant and held -
“6.6 What applies in the present case is the decision of the Hon'ble High Court of Punjab & Haryana in the case of MachinoMontell (supra) which is directly on the point of dispute involved in the present case. In that case also, the question was whether the interest and penal liability would arise or not merely because credit has been reversed before issuance of the show-cause notice. The Hon'ble High Court held that if any of the element such as fraud, collusion, suppression or willful mis-statement are present, the provisions of Section 11A(2B) would not apply and interest and penalty would be imposable. That is the issue involved in the present case. From the evidence available on records, it is clear that the respondent has resorted to fraud and forgery, therefore, the order of the lower appellate authority setting aside the interest and penal liability is clearly bad in law.”
In fine, the CESTAT set aside the order passed by the Commissioner and restored the order passed by the adjudicating authority. Thus, the Revenue's appeal was allowed.
(See 2013-TIOL-1835-CESTAT-MUM)
