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TMI Blog2016 (2) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... ared the product without payment of duty during the said period. 2.1. The original authority issued a show cause notice, dated 22.09.2004, as to why an amount of Rs. 1,22,300/- being the duty on Mercerized yarn should not be demanded along with penalty and interest. The appellants sent a reply, dated 19.10.2004 and filed a written submissions, dated 21.12.2004, contending that the show cause notice was timebarred; that there was no intention on the part of the assessee to evade payment of duty; with the introduction of Excise duty on textiles, in Budget 2003, there was lot of confusion at all levels with frequent amendments and as soon as the demand was made, it was paid without any delay. Thereafter, the Original Authority confirmed the demand of duty of Rs. 1,22,300/-. Rs. 1,06,348/- was adjusted by approproation from CENVAT Credit and an amount of Rs. 22,069/- was paid, by cash, vide TR6 challan, dated 25.11.2003. In addition to that, the Original Authority made the following demands:- (i) payment of interest at applicable rate under Section 11AB of the Central Excise Act, 1944 (hereinafter referred to as "the Act"); (ii) penalty of Rs. 1,22,300/- under Section 11 AC of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t duty credit as against the demand was held sustainable. The third respondent dismissed the appeal, on 09.04.2014, giving a finding that the communication requiring the assessees to disclose as to whether penalty and interest have been paid and also giving a warning that recovery procedings would follow in case of failure, would only amount to a communication and therefore, the appeal is not maintainable. However, there was an observation that the Department should have quantified the demand before initiating the recovery proceedings. Thereafter, the appellant sought for quantification of the demand. The second respondent issued a reply, dated 22.08.2014, stating that the duty demanded is 'nil' and directed the appellant to pay penalty and interest. 2.6. It is relevant to point out that when the Department replied stating that the duty demanded is 'nil', it did not mean anything on liability to pay duty, but the meaning conveyed is that, as the duty demanded has already been paid, balance payable is nil. This could only be the reasonable meaning having regard to the facts and context, in which it is said. 2.7. Aggrieved by the final order, dated 09.04.2014, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Bill, 2001 receives the assent of the President. Explanation 1.- Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal, National Tax Tribunal or, as the case may be, the Court, the interest shall be payable on such reduced amount of duty. Explanation 2.-Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal, National Tax Tribunal or, as the case may be, the Court, the interest shall be payable on such increased or further increased amount of duty. 11AC.Penalty for short-levy or non-levy of duty in certain cases.- Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined: Provided that where such duty as determined under sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is necessary to state what is CENVAT credit. 4.3. CENVAT credit means excise duty and service tax paid on inputs (like raw material, fuel etc.) for manufacturing of goods is deducted from the excise duty payable on the goods manufactured. With effect from 10.09.2004, New Cenvat Credit Rules 2004 was introduced which provided for credit of duty paid on inputs, Capital goods and service tax paid on input services used in or in relation to manufacture of excisable goods. A service provider is entitled to credit of excise duty paid on inputs and Capital goods and service tax paid on input services used by him for providing the output service. 5. This is a case where the Tribunal has given a finding that the assessees ought to have been given the benefit of CENVAT Credit. 5.1. This finding on fact is not under challenge by the Revenue. 5.2. The main contention of the learned counsel for the respondents / Revenue is that, the assessees are not even entitled to file an Appeal (before the CESTAT), based on a mere communication and therefore, the finding given by the CESTAT stating that the assessees ought to have been given CENVAT Credit, cannot be taken advantage of, by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty is mandatory and the Courts have no discretion to reduce the penalty and therefore, the assessees are liable to pay the penalty, as demanded by the Department. In support of the contention, the decision reported in 2015 (321) E.L.T. 86 (Mad) (Commissioner of Central Excise, Puducherry v. CESTAT, Chennai) is relied upon, where-under, relying upon the decision of the Hon 'ble Supreme Court reported in 2009 (238) E.L.T. 3 (SC) (Union of India v. Rajasthan Spinning and Weaving Mills), it has been held that penalty under Section 11AC of the Act is mandatory and there is no element of discretion vested with the authorities to waive the interest or penalty. 6.1. On the other hand, the learned counsel for the Assessees would submit that, even though no discretion is vested with the authorities to reduce the interest or penalty and the main issue to be considered is, when there is no liability to pay any outstanding tax and when there is no delay or non-payment of duty, the liability to pay the interest or penalty does not arise for consideration, the decision reported in 2015 (321) E.L.T. 86 (Mad) (cited supra) will not be applicable to the facts of the case. It is pointed out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in proviso to Section 11A(1) of the Act and that unfortunately, provisions of Section 11 A(1) had been used unwarrantedly. 8.3. These issues raised by the assessees have been partly answered by the Tribunal. 9. Coming to the facts of the case on hand, in the Final Order, dated 05.09.2008, the CESTAT has given two vital findings, which reads as under:- "I have found hardly any valid ground against the demand of duty on mercerized yarn; rejection by the lower authorities of the assessees' prayer for grant of input duty credit is apparently unjustifiable; the reasons stated by the lower authorities, in this case, for denial of CENVAT Credit for input (Gray yarn) is that the appellants did not follow the procedure like filing of declaration etc., It is trite law that a substantive right is not to be denied on the ground of infraction of procedural provision." 9.1. On these findings, the impunged order to the extent of deniying the input duty credit has been set-aside. 9.2. Therefore, when the input duty credit is allowed, the duty is deemed to have been paid on the original date of payment of duty. When input duty credit is allowed, then there is no question of any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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