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TMI Blog2022 (7) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... d there can be no denial of the same - Reference is made to the decision of the Hon ble Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS INTERNATIONAL AUTO LTD. [ 2010 (1) TMI 151 - SUPREME COURT] where it was held that Explanation (2) to sub-section 2(B) of section 11A ibid states that payment by assesees in default by own ascertainment or as ascertained by C.E. officer not exempt from interest chargeable under section 11AB ibid. Interest leviable for loss of revenue on any count. Accrual of price differential duty when paid after clearance, it indicates short payment/ short levy on date of removal hence interest become leviable. Extended period of limitation - HELD THAT:- The appellants were made aware in 2008 about the default in short payment of amount. However, they continued with the practice and have showed a willful intention to not act as per the provisions of Rule 3(5) of the Cenvat Credit Rules. In such situation, invocation of extended period is justified and needs to be upheld. The decision of CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR [ 1995 (12) TMI 72 - SUPREME COURT] relied upon by the appellants is altogether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 2004 for the removal of inputs on which cenvat credit has been taken, the appellants were required to pay an amount equal to the credit availed in respect of such inputs and such removal was to be made under cover of an invoice referred to in Rule 9. On being pointed out by the Audit, appellants reversed the amount short paid by them for the period 2006-07. 2.3 It was observed that subsequent to making such reversal on 11.12.2008. Appellants continued with the same practice for the years 2007-08, 2008-09 and 2009-10. Appellants stated vide their letter dated 29.09.2010 that during the period 2007- 08, 2008-09, 2009-10 and 2010-11 (upto September 2010) they had not cleared inputs as such wherein the amount paid on clearance of inputs as such was less than the credit availed. After further verification and being pointed out by the Range Superintendent, the appellants reversed the cenvat credit subsequently in respect of these clearances made during the above referred period. 2.4 The appellants were asked to pay the interest of the amounts short paid by them. However, they refused to deposit the interest due stating that they had availed the credit correctly and hence they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessable value of said inputs ranging from Rs.42.76 to Rs.50.66 per Kg and hence Cenvat Credit was short debited /reversed. When the above was noticed and pointed out, the same was fully reversed in December, 2008 and October, 2010, much before the date of issue of SCN as SCN was issued on 13th December, 2010, after limitation period. Hence entire demand is barred by limitation. there is no suppression or intention to evade the payment of duty. Moreover the cenvat credit was availed correctly at the time of receipt of inputs in the factory of the Appellants and thus there is no wrongful availment of Cenvat Credit. The short reversal of Cenvat Credit was un- intentional as it is caused due to an error in arriving the assessable or selling price. As a result of this ignorance, the appellant could not able recover the actual cost / value of such Inputs from the buyer/customers timely. The differential cost/value and the amount of differential cenvat credit was recovered much later through supplementary invoices from buyers/customers and never utilized but reversed when noticed and pointed out. In the absence of any suppression with Intend to evade the payment of duty, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be paid by them in terms of Rule 3(5) of the Cenvat Credit Rules, 2004. Rule 3(5) of the Cenvat Credit Rules provides as under:- When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9 : Provided that such payment shall not be required to be made where any inputs [or capital goods] are removed outside the premises of the provider of output service for providing the output service : Provided further that such payment shall not be required to be made where any inputs are removed outside the factory for providing free warranty for final products. 4.3 Appellants do not deny such short payment and have on being pointed out paid the differential amounts as stated above. The dispute is only in respect of the interest that was required to be paid in respect of the clearances of inputs as such made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is for a reason other than deceit; the default is due to oversight or some mistake and it is not intentional. The second in which the non-payment or short payment etc. of duty is by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty ; that is to say, it is intentional, deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently. Section 11A, however allow the assessees in default in both kinds of cases to make amends, subject of course to certain terms and conditions. The cases where the non-payment or short payment etc. of duty is by reason of fraud collusion etc. are dealt with under sub-section (1A) of section 11A and the cases where the non-payment or short payment of duty is not intentional under sub-section (2B). 10. Sub-section (2B) of section 11A provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. The differential duty was due at that time i.e. when the revised rates applicable with retrospective effect were learnt by the Assessee, which was much after the clearance of the goods and therefore, question of payment of interest does not arise as the duty was paid as soon as it was learnt that it was payable. Finding that provisions of Section 11A(2) and 11A(2B) were not applicable as the situation occurred in the instant case was quite different, section 11AB (1) was not at all applicable, and therefore, the Assessee was not required to pay interest. 13. It further held that a case of this nature would not fall in the category where duty of excise was not paid or short-paid. 14. We are unable to subscribe to the view taken by the High Court. It is to be noted that the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared , on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the Scheme of recovery of duty under the Act, particularly after insertion of Act 14 of 2001 and Act 32 of 2003, the judgement of this Court in the case of M.R.F. Limited [supra] would not apply. That judgement was on interpretation of Section 11B of the Act, which concerns claim for refund of duty by the assessee. That judgement was in the context of the price list approved on 14th May, 1983. In that case, assessee had made a claim for refund of excise duty on the differential between the price on the date of removal and the reduced price at which tyres were sold. The price was approved by the Government. In that case, the assessee submitted that its price list was approved, by the Government on 14th May, 1983, but subsequent thereto, on account of consumer resistance, the Government of India directed the assessee to roll back the prices to pre-14th May, 1983 level and on that account, price differential arose on the basis of which the assessee claimed refund of excise duty which stood rejected by this Court on the ground that once the assessee had cleared the goods on classification, the assessee became liable to payment of duty on the date of removal and subsequent reductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n- determination of the amount as such pursuant to which the amount is paid it may happen that there may be shortfall in the amount which is paid by the assessee in comparison to what the assessee is legally required to pay. The short payment which is therefore referred to in the second Explanation to Section 11A(2)(B) can only be the aforesaid short payment and it is not referring to the short payment of duty which was originally occasioned and which is the subject matter of Section 11A(2)(b) and Section 11AB. 63. We are of the view that the reasoning of this Court in the order referring the cases to us (to this Bench) that for the purpose of Section 11AB, the expression ought to have been paid would mean the time when the price was agreed upon by the seller and the buyer does not square with our understanding of the clear words used in Section 11AB and as the rules proclaim otherwise and it provides for the duty to be paid for every removal of goods on or before the 6th day of the succeeding month. Interpreting the words in the manner contemplated by the Bench which referred the matter would result in doing violence to the provisions of the Act and the Rules which we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed excise duty, Cenvat credit cannot be denied. We observe that Revenue is not denying the Cenvat credit taken. We observe that appellant is working under the self assessment procedure. In the monthly return they have described goods under Chapter 38 and paid duty. It is only during physical verification and audit of the factory that the correct facts has come out. The catena of the case laws submitted by the appellant are not relevant in the present facts of the case as revenue has not proposed to deny the Cenvat credit but what revenue is demanding is the differential amount. Hence the case law quoted are not relevant to the facts of present case. 7. The next contention was the quantification of the duty was not correct. During the argument the Bench had queried from the counsel whether there is any other method to compute the duty. To this the reply of the counsel was that there is no such method but, rules did not specify the method adopted by Revenue. We have seen the show cause notice and the method of quantification. Since the appellant is not able to make one to one correlation with the goods cleared as such with the imported goods what revenue has done is that com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted that as per CBEC manual, ER1 return are required to be scrutinised. On query from the Bench whether any details have been asked during any scrutiny, and they have submitted the manufacturing process or informed in detail of the activity, the answer was negative. Nobody on the basis of ER1 return filed by the appellant can make out that the goods are being cleared as such. We therefore, reject the said contention. 4.9 We also note that the appellants were made aware in 2008 about the default in short payment of amount. However, they continued with the practice and have showed a willful intention to not act as per the provisions of Rule 3(5) of the Cenvat Credit Rules. In such situation, invocation of extended period is justified and needs to be upheld. 4.10 In the case of Rajasthan Spinning Weaving Mills [2009 (238) ELT 3 (SC)], Hon ble Supreme Court has held as follows:- 17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai Anr. [2007 (8) SCALE 304]. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the Act ) inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the IT Act ) taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated which he knows or has reason to believe . The said clause referred to wilful action. According to learned counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11AC. Where the outer limit of penalty is fixed and the statute provides that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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