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TMI Blog2023 (9) TMI 1134X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Notification No. 1/2011 dated 1.3.2011. The appellant admits the fact that they are aware of the fact that on rubberised coir mattresses, they are not supposed to avail CENVAT credit on inputs and inputs services in as much as they were claiming concessional rate of duty - when all other units were strictly following the conditions of the exemption Notification, how could this contravention by this unit go unnoticed by their own audit officers during the submission of the financial statement of the company. Whether there was any violation of the conditions of the exemption Notification as the mistake once noticed was made good by reversing the entire credit along with interest? - HELD THAT:- The irregular availment of credit came to the notice of the department only after the officers of internal audit party visited their unit and verified their records. The Commissioner at para 29 of the impugned order also notes that on one hand, the noticee claim that they have taken a policy decision to clear the goods on payment of 1% duty and on the other, they claim that there was confusion in their minds regarding CENVAT credit to be availed. It cannot be accepted that the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross the country. The officers of internal audit on scrutiny of records found that the appellant had availed CENVAT credit on the inputs and input services used for manufacture of rubberised coir mattress and products and accordingly, notice was issued to deny the benefit of Notification No.1/2011 dated 1.3.2011. The Commissioner vide impugned order dated 5.12.2014 held that non-availment of CENVAT credit was a precondition to avail the benefit of Notification No. 1/2011 dated 1.3.2011 and therefore, clearance of the final goods at the concessional rate of duty was incorrect in as much as they had availed credit on the inputs and input services. Accordingly, the Commissioner confirmed demand of duty for the period 1.3.2011 to 31.3.2013 and imposed penalty on the Managing Director and Vice President of the company for having violated the conditions of the Notification knowing very well that they were not eligible for the benefit of the concessional rate of duty as and when CENVAT credit was availed on the inputs and input services. 2. Mr. Rajesh Chander Kumar Rohra, Sr. Advocate and Mrs. Yovini Rajesh Kumar, Advocate on behalf of the appellant submitted that as and when the audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiming concessional rate of duty. Their only defense is that it was an inadvertent human error on their part but since they have reversed immediately along with interest when pointed out, they cannot be penalised with the standard rate of duty of 5% / 6% denying the benefit of the Notification. The appellant also admits that policy decision was taken to pay 1% duty on rubberised coir products without availing CENVAT credit, from all their units across the country. This clearly proves the fact that they were well aware that to avail the concessional rate of duty of 1% as against the standard rate of duty of 5%/6%, they were willing to forego the CENVAT credit on the inputs and input services availed in the manufacture of rubberised coir products. Moreover, as rightly observed by the adjudicating authority when all other units were strictly following the conditions of the exemption Notification, how could this contravention by this unit go unnoticed by their own audit officers during the submission of the financial statement of the company. 5. Now, the question arises whether there was any violation of the conditions of the exemption Notification as the mistake once noticed was ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation dated 11-8- 1994 was to exempt those specified intermediate goods, which were otherwise excisable to duty, and not to exempt or absolve the respondents from following the statutory requirements for the manufacture of intermediate excisable goods. The notification under Chapter X was designed in such a manner to ensure an inseparable link between the supplier and recipient of excisable goods for the manufacture of specified final products. Rule 192 of Chapter X states that a manufacturer intending to receive duty free goods under remission is required to make an application in Form R-1 for obtaining excisable goods to be used for special industrial purpose giving details of the estimated quantity of each class or variety of goods and the value of such goods likely to be used during the year, commodities to be manufactured and estimated output and clearance of each commodity during the year, manner of manufacture, purpose for which manufactured product is supplied and the source from which excisable goods will be obtained. 22. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh construction of a condition thereof may be given a liberal meaning if the same is directory in nature. 24. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or the substance of the requirements. Like the concept of reasonableness , the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e procedure laid down in Chapter X, is meant only to establish the receipt of goods by the recipient unit and their utilization. The Tribunal completely overlooked the object and purpose of the procedure laid down in Chapter X. The goods manufactured at the supplier end were excisable goods and if a party wants remission of duty, he has to follow certain pre-requisities, the object of which is to see that the goods be not diverted or utilized for some other purpose, on the guise of the exemption notification. Detailed procedures have been laid down in Chapter X so as to curb the diversion and misutilization of goods which are otherwise excisable. The plea of substantial compliance and intended use is, therefore, rejected for the reasons already stated . 6.4 The Hon ble Supreme Court of India in the case of Commissioner of Cus. (Import), Mumbai vs. Dilip Kumar Company in Civil Appeal No. 3327 Of 2007, decided on 30-7- 2018 as reported in 2018 (361) E.L.T. 577 (S.C.) observed that: (i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ENVAT credit to be availed. It cannot be accepted that the contravention has not come to the notice of the noticee either at the time of their internal audit, statutory audit or during the preparation of the financial statement of the company. In view of the above, it is very clear that the appellant had consciously taken CENVAT credit which was irregular. Hence, having suppressed the facts, the Commissioner was right in invoking the Proviso to Section 11A. The Hon ble Delhi High Court in identical circumstances in the case of Lally Automobiles Pvt. Ltd. vs. Commissioner (Adjudication), C. Ex: 2018(17) GSTL 433 (Del.) responding to the arguments of similar nature i.e., invocation of extended period of limitation, observed as follows:- 18. As regards the method of calculation and invocation of extended period of penalty, the assessee s contentions again, to the Court s mind, are groundless. The assessee concededly did not maintain regular separate accounts in respect of non-service tax leviable activities. Therefore, the adjudicating authority adopted the method of proportionate turnover based attribution to the assessee s liability: I find that it was clear in 2008 itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven that trading was never taxable under the Finance Act, 1994. In these circumstances, the Revenue was justified in invoking the extended period of limitation in this case. The said judgment has later been upheld by the Hon ble Supreme Court reported in 2019(24) GSTL J115(SC). 9. In view of the above, invoking of proviso to Section 11A is upheld. The Commissioner has imposed penalty of Rs.22,12,12,586/- on the appellant under Rule 25 read with Section 11AC of Central Excise Act, 1944, which is equivalent to the duty demanded. However, it is noticed that Rs.5,90,57,107/- has already been paid at the rate of 1% during the relevant period; therefore, the penalty also accordingly needs to be re- determined for the differential payment of duty. 10. With regard to penalties on Shri Kushroo, Engineer, Head of Finance; Shri M. S. Kamath, Vice President and Shri T. Sudhakar Pai, Chairman and Managing Director, the only allegation in the show-cause notice is that they are decision makers on the statutory matters of the company. But there are no specific allegations specified to allege their involvement in taking irregular credit by the company in spite of a policy decision was ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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