9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (2) TMI 1147 - AT - Central ExciseCapital goods CENVAT Credit - whether the appellant would be liable to pay interest under Section 11AB on the wrongly taken capital goods CENVAT Credi and penalty under Rule 13(2) of CENVAT Credit Rules, 2001 read with Section 11AC of Central Excise Act, 1944? - Entitlement to exemption under a notification No. 15/94-C.E. dated 1-3-1994 which is subject to non-availment of CENVAT Credit in respect of inputs/input services or capital goods would be available when initially such CENVAT Credit had been taken but was reversed subsequent to clearance of the goods - Held that - Since in the present case, there is no dispute that entire CENVAT Credit, though wrongly and fraudulently taken, has been reversed, we hold that the appellant cannot be denied the benefit of exemption Notification No. 14/2002-C.E. during period from 1-3-2002 to 31-3-2003 as for the purpose of this exemption the appellant would have to be treated as not having availed any capital goods or inputs duty CENVAT Credit. On a conjoint reading of Section 11AB and Rules 3 and 4 of the Cenvat Credit Rules we proceeded to hold that the interest would be payable from the date Cenvat credit is wrongly utilized. No reason to read the word OR in between the expressions taken or utilized wrongly or has been erroneously refunded as the word AND . On the happening of any of the three circumstances such credit becomes recoverable along with interest. Where the entire duty had been paid along with interest before the issuance of show cause notice but still in the adjudication order no option was given by the Commissioner to pay 25 per cent. of the amount of duty demand confirmed towards penalty within 30 days in terms of proviso to Section 11AC, the benefit of lower penalty cannot be denied and that in such cases, the penalty imposable would be 25 per cent. of the duty demand. But in this case, the conditions set down in the case of K.P. Pouches 2008 (1) TMI 296 - DELHI HIGH COURT are not satisfied as the appellant have not paid the interest under Section 11AB on the wrongly taken CENVAT Credit, which as discussed above, is leviable. In view of this we hold that the benefit of lower penalty in terms of proviso to Section 11AC is not available to the appellant. As regards penalty under Rule 26 of the Central Excise Rules, 2002 on Sh. Vineet Sethi. The impugned order does not discuss as to how the elements required for attracting the penal provisions of this Rule are present in this case. Hence, the penalty on Sh. Sethi has been set aside. Thus while the duty demand of ₹ 2,24,81,249/- against the appellant in respect of the clearances of grey cotton fabrics during period from 1-3-2002 to 31-3-2002 along with interest thereon under Section 11AC and penalty of equal amount is set aside, the CENVAT Credit demand of ₹ 66,69,432/- against the appellant along with interest and penalty of equal amount is upheld. As regards, the penalty of ₹ 50,000/- under Rule 26 of Central Excise Rules, 2002 on Sh. Vineet Sethi is imposed, the same is set aside. Thus, while the appeal filed by M/s. Orient Texfabs Ltd. is partly allowed the appeal filed by Sh. Vineet Sethi is also allowed.
Issues Involved:
1. Eligibility for CENVAT Credit on capital goods. 2. Liability for interest on wrongly availed CENVAT Credit. 3. Imposition of penalty under Rule 13(2) of the CENVAT Credit Rules, 2001 read with Section 11AC of the Central Excise Act, 1944. 4. Eligibility for exemption under Notification No. 14/2002-C.E. 5. Penalty on the Director of the appellant company under Rule 26 of the Central Excise Rules, 2002. Detailed Analysis: 1. Eligibility for CENVAT Credit on Capital Goods: The appellant company, engaged in the manufacture of grey cotton fabrics, had taken CENVAT Credit on capital goods amounting to Rs. 66,69,432/- during 2000-01 and 2001-02. However, the capital goods were exclusively used for manufacturing exempted goods (grey cotton fabrics), making them ineligible for CENVAT Credit. The appellant fraudulently showed clearances of impregnated nylon fabrics, a dutiable product, to justify the credit. The Tribunal confirmed that the credit was wrongly taken and reversed it in November 2003. 2. Liability for Interest on Wrongly Availed CENVAT Credit: The interest on wrongly availed CENVAT Credit is governed by Rule 12 of the CENVAT Credit Rules, 2001 read with Section 11AB of the Central Excise Act, 1944. The Tribunal referred to the Supreme Court's judgment in Union of India v. Ind-Swift Laboratories Ltd., which held that interest is payable from the date of taking the wrong credit until its reversal, regardless of its utilization. The appellant was thus liable to pay interest on the wrongly availed credit. 3. Imposition of Penalty under Rule 13(2) of the CENVAT Credit Rules, 2001 read with Section 11AC of the Central Excise Act, 1944: The Tribunal upheld the penalty under Rule 13(2) read with Section 11AC, as the CENVAT Credit was taken fraudulently. The penalty is applicable irrespective of whether the credit was utilized or reversed before the issuance of the show cause notice. The Tribunal relied on the Supreme Court's judgment in Rajasthan Spinning and Weaving Mills, which established that penalty under Section 11AC is attracted in cases of fraud, wilful misstatement, or suppression of facts. 4. Eligibility for Exemption under Notification No. 14/2002-C.E.: The exemption under Notification No. 14/2002-C.E. was subject to non-availment of CENVAT Credit on inputs or capital goods. The Tribunal referred to the Allahabad High Court's judgment in Hello Minerals Water Pvt. Ltd. and the Gujarat High Court's judgment in CCE v. Ashima Dyecot Ltd., which held that reversal of credit, even after clearance, amounts to non-availment of credit. Thus, the appellant was eligible for the exemption despite initially taking the credit, as it was subsequently reversed. 5. Penalty on the Director of the Appellant Company under Rule 26 of the Central Excise Rules, 2002: The Tribunal set aside the penalty of Rs. 50,000/- imposed on the Director under Rule 26, as the impugned order did not discuss the elements required to attract the penal provisions of this rule. Conclusion: The Tribunal set aside the duty demand of Rs. 2,24,81,249/- along with interest and penalty for the period from 1-3-2002 to 31-3-2003. However, it upheld the CENVAT Credit demand of Rs. 66,69,432/- along with interest and penalty of an equal amount. The penalty on the Director was set aside. The appeal by M/s. Orient Texfabs Ltd. was partly allowed, and the appeal by the Director was fully allowed.
|
