CX - CENVAT credit suo motu reversed by assessee - where there has been no determination of demand u/s 11A(2), penalty u/s 11AC cannot be imposed: CESTAT
By TIOL News Service
MUMBAI, SEPT 01, 2015 : THE appellant had taken inadmissible cenvat credit amounting to Rs.4,38,508/- and Rs.25,706/- which was reversed on pointing out by the department. The appellant also paid the interest.
Subsequently, in respect of inadmissible credit of Rs.4,38,508/-, a SCN was issued proposing ONLY imposition of penalty u/s 11AC r/w rule 15 of the CCR, 2004 and recovery of interest u/s 11AB. In respect of the other reversal of Rs.25,706/-, SCN demanded the inadmissible credit and imposition of penalty and interest of Rs.5,625/-. In adjudication, demands of penalties and interest were confirmed and this order was upheld by Commissioner(A).
Aggrieved by the adjudication orders, the appellant preferred appeals before the Commissioner (Appeals) who also upheld the penalties and interest. And, therefore, the appellant is before the CESTAT.
The appellant submitted that since they had admittedly reversed the inadmissible credits and not contested the same and that the credit was not utilized, penalty and interest were not warranted. Case laws of U.P. State Sugar Corporation Ltd. 2007-TIOL-2193-CESTAT-DEL and Bill Forge Pvt. Ltd. 2011-TIOL-799-HC-KAR-CX were cited in support.
The AR submitted that the demand was pertaining to the period beyond one year and extended period was rightly invoked and, therefore, penalty u/s 11AC & interest u/s 11AB cannot be avoided in view of the decisions in Dharmendra Textile Processors 2008-TIOL-192-SC-CX-LB & Ind-Swift Laboratories Ltd. 2011-TIOL-21-SC-CX.
The Bench considered the submissions and in the matter of the appeal filed in respect of the CENVAT credit of Rs.4,38,508/- made the following observations -
+ …it is observed that the show cause notice was issued only for demand of interest and penalty as the cenvat credit was suo motu paid by the appellant. In this fact, I find that the determination of demand was not made under Section 11A(2). Section 11AC can be invoked only in cases where the demand is determined under Section 11A(2).
+ From the section 11AC, it is clear that in cases where the duty is determined under Section 11A(2), the penalty under Section 11AC can be imposed. In the present case there was neither any show cause notice nor any adjudication order in respect of payment of cenvat amount of Rs.4,38,508/- by the appellant. Therefore, this amount has not been determined under Section 11A (2). Consequently, in my considered view, the penalty under Section 11AC cannot be imposed in the present case. I, therefore, set aside the penalty of Rs.4,38,508/- imposed under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004.
+ As regards interest, …in terms of the Hon'ble Supreme Court's judgment in the case of Ind-Swift Laboratories (supra), the interest is chargeable from the date of credit taken in the cenvat account by the appellant irrespective of the fact that the said credit was not utilized. Therefore, the interest under Section 11AB demanded by the lower authority and upheld by the Commissioner (Appeals) is maintained.
The appeal was partly allowed.
In the matter of the second appeal concerning the cenvat amount of Rs.25,706/-, the Bench noted that the SCN demanded the wrongly availed credit and the demand of duty was determined under Section 11A(2). Holding that the penalty was rightly imposed and interest was also correctly demanded, this appeal was dismissed.
(See 2015-TIOL-1833-CESTAT-MUM)
