2015 (12) TMI 942 - AT - Central Excise

Denial of suo moto CENVAT Credit - department took objection to availing of credit suo-moto and issued show cause notice dated 09.10.2009 on the ground that the there was no provision for taking such suo-moto credit and the appellants were not legally empowered to do so - Held that - The appellants on their own decided to pay the amount by way of utilising cenvat credit. However, later on, after an year, even though the show cause notices were in adjudication, they decided to take suo-moto credit of the said amount already paid. Therefore, we find that payment of the same by way of RG 23A Part-II cannot be treated as deposit. The same is depicted in their statutory books and returns as duty. Revenue has also accounted the same as duty. Payment of duty through PLA or cenvat credit is treated at par. The nine Member Bench of the Hon ble Supreme Court in the case of Mafatlal Industries Limited (1996 (12) TMI 50 - SUPREME COURT OF INDIA) has held that whatever amount has been paid to the department has to be claimed back if eligible by the route of refund under Section 11B, except for those payments which are ultra-vires. The Tribunal in the case of BDH Industries Limited (2008 (7) TMI 78 - CESTAT MUMBAI) has gone into the issue in detail and has held that such suo-moto re-credit cannot be taken The decision of the Commissioner to disallow the suo-moto credit is legally correct. In the case of ICMC Corporation Limited vs. CESTAT (2012 (3) TMI 455 - CESTAT CHENNAI), the assessee had re-credited the credit reversed on those services mentioned under Rule 6(5) of Cenvat Credit Rules. In the case of Shyam Textile Mills & Ans. vs. UOI (2004 (6) TMI 590 - GUJARAT HIGH COURT), the issue pertained to deemed credit. In the case of Sopariwala Exports Pvt. Limited (2013 (5) TMI 430 - CESTAT AHMEDABAD), it was a question of duty paid twice over. - since the show cause notices have been set-aside later on by the Tribunal, we do not find any reason to demand interest. We also find that though the appellant has contravened the provisions by taking suo-moto credit, a penalty of ₹ 7 Crores is excessive, and it should be reduced drastically to be commensurate with the offence committed - Decided partly in favour of assessee.

Summary

Issues:
1. Validity of taking suo-moto credit of &8377; 26 Crores against demand raised in show cause notices.
2. Interpretation of Rule 14 of Cenvat Credit Rules, 2004 and Section 11A (i) of the Central Excise Act, 1944.
3. Applicability of legal provisions for claiming refund and re-crediting duty amount.
4. Justification for disallowing suo-moto credit and imposition of penalty.

Analysis:

Issue 1:
The appellants voluntarily paid &8377; 26 Crore by utilizing CENVAT credit against demands raised in show cause notices to avoid future interest liability. Subsequently, they took suo-moto credit of the same amount, which the department objected to, leading to a show cause notice. The impugned Order-in-Original disallowed the re-credited amount under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A (i) of the Central Excise Act, 1944, and imposed a penalty of &8377; 7 Crore on the appellant.

Issue 2:
The Counsel for the appellants argued that the payment should be treated as a deposit, as there was no confirmed duty liability. However, the absence of specific provisions for re-crediting suo-moto was acknowledged. The department contended that the appellants lacked legal sanction to re-credit the duty amount and emphasized the need for following statutory refund procedures. The Tribunal's decision in BDH Industries Limited's case was cited to support the Revenue's stance.

Issue 3:
Upon review, the Tribunal found that the appellants paid the duty amount voluntarily, re-credited it after a year, and treated it as duty in their books and returns. The Tribunal referred to the Supreme Court's decision in Mafatlal Industries Limited, emphasizing the need to claim back eligible amounts through the refund process under Section 11B. The Tribunal also highlighted the legal requirement for departmental sanction in correcting accounts and the doctrine of unjust enrichment in refund cases.

Issue 4:
After analyzing the submissions and case laws, the Tribunal concluded that the Commissioner's decision to disallow the suo-moto credit was legally correct. While setting aside the demand for interest due to subsequent Tribunal decisions, the penalty of &8377; 7 Crore was deemed excessive and reduced to &8377; 10,00,000. The impugned order was modified accordingly, maintaining the disallowance of the suo-moto credit but adjusting the penalty amount.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT AHMEDABAD highlights the key legal issues, arguments presented by both parties, relevant legal provisions, and the Tribunal's decision on each issue, ensuring a comprehensive understanding of the case.