[Order]. - These two appeals are directed against orders-in-appeal No. P-I/VSK/262 & 263/2009 dated 10-12-2009 passed by Commissioner of Central Excise (Appeals), Pune-I, wherein the learned Commissioner (Appeals) upheld the penalty under Section 11AC and interest under Section 11AB.
2. The fact of the case is that the appellant, M/s. Force Motors Ltd., Pune, had taken inadmissible Cenvat credit amounting to Rs. 4,38,508/- and Rs. 25,706/- which was reversed on pointing out by the department. The appellant also paid the interest. Subsequently, in respect of inadmissible credit of Rs. 4,38,508/-, a show cause notice was issued only proposing imposition of penalty under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 and recovery of interest under Section 11AB. In the adjudication, demands of penalties and interest were confirmed. Aggrieved by the adjudication orders, the appellant preferred appeal before the Commissioner (Appeals) who also upheld the penalties and interest. Aggrieved by the impugned orders, the appellant is before me.
3. Shri H.S. Hawaldar, learned counsel for the appellant, submits that they have availed the credit inadvertently on certain inputs which they admittedly reversed and not contested. Therefore, penalty under Section 11AC should not have been imposed. As regards interest, he submits that they have taken inadmissible credit but the same was not utilized and it was lying in accumulated credit balance in the Cenvat account. Since inadmissible credit was not utilized, the interest as well as penalty was not warranted. He placed reliance on following judgments :-
(i) U.P. State Sugar Corporation Ltd. v. CCE, Meerut-I reported in (Tri.-Del.);
(ii) CCE, Ghaziabad v. Ashoka Metal Dicor (P) Ltd. reported in (All.) = (All.)
(iii) CCE, Meerut-II v. Rana Sugar Ltd. reported in (All.), and
(iv) CCE&ST, LTU, Bangalore v. Bill Forge Pvt. Ltd. reported in (Kar.) = 2012 (28) S.T.R. 204 (Kar.)
4. On the other hand, Shri V.K. Shastri, learned Assistant Commissioner (AR), appearing on behalf of the Revenue, reiterates the findings of the impugned order. He submits that the appellant had taken inadmissible credit and suppressed the fact of the same from the department. He submits that the demand was pertaining to the period beyond one year and extended period was rightly invoked. Therefore, penalty under Section 11AC cannot be waived in terms of the Hon’ble Supreme Court’s judgment in the case of UOI v. Dharmendra Textile Processors reported in (S.C.). As regards interest, he submits that in case of wrong availment of Cenvat credit, the period of interest should be reckoned right from the date of availment of credit and not from the utilization of the credit. This has been held by the Hon’ble Supreme Court in the case of UOI v. Ind-Swift Laboratories Ltd. reported in (S.C.) = (S.C.).
5. I have carefully considered the submissions made by both the sides. As regards appeal No. E/361/10, it is observed that the show cause notice was issued only for demand of interest and penalty as the Cenvat credit was suo motu paid by the appellant. In this fact, I find that the determination of demand was not made under Section 11A(2). Section 11AC can be invoked only in cases where the demand is determined under Section 11A(2). Section 11AC is reproduced below :-
SECTION 11AC. Penalty for short-levy or non-levy of duty in certain cases. :-
(1) The amount of penalty for non-levy or short-levy or non-payment or short payment or erroneous refund shall be as follows :-
(a) where any duty of excise has not been levied or paid or short-levied or short paid or erroneously refunded, by reason of fraud or collusion or any wilful 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 (10) of Section 11A shall also be liable to pay a penalty equal to the duty so determined;
(b) where details of any transaction available in the specified records, reveal that any duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded as referred to in sub-section (5) of Section 11A, the person who is liable to pay duty as determined under sub-section (10) of Section 11A shall also be liable to pay a penalty equal to fifty per cent of the duty so determined;
(c) where any duty as determined under sub-section (10) of Section 11A and the interest payable thereon under Section 11AA in respect of transactions referred to in clause (b) is paid within thirty days of the date of communication of order of the Central Excise Officer who has determined such duty, the amount of penalty liable to be paid by such person shall be twenty-five per cent of the duty so determined;
(d) where the appellate authority modifies the amount of duty of excise determined by the Central Excise Officer under sub-section (10) of Section 11A, then, the amount of penalties and interest payable shall stand modified accordingly and after taking into account the amount of duty of excise so modified, the person who is liable to pay duty as determined under subsection (10) of Section 11A shall also be liable to pay such amount of penalty or interest so modified.
Explanation - For the removal of doubts, it is hereby declared that in a case where a notice has been served under sub-section (4) of Section 11A and subsequent to issue of such notice, the Central Excise Officer is of the opinion that the transactions in respect of which notice was issued have been recorded in specified records and the case falls under sub-section (5), penalty equal to fifty per cent of the duty shall be leviable.
(2) Where the amount as modified by the appellate authority is more than the amount determined under sub-section (10) of Section 11A by the Central Excise Officer, the time within which the interest or penalty is payable under this Act shall be counted from the date of the order of the appellate authority in respect of such increased amount.”
6. From the above section, it is clear that in cases where the duty is determined under section 11A(2), the penalty under section 11AC can be imposed. In the present case there was neither any show cause notice nor any adjudication order in respect of payment of Cenvat amount of Rs. 4,38,508/- by the appellant. Therefore, this amount has not been determined under section 11A(2). Consequently, in my considered view, the penalty under section 11AC cannot be imposed in the present case. I, therefore, set aside the penalty of Rs. 4,38,508/- imposed under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004.
6.1 As regards interest, I agree with the learned AR that in terms of the Hon’ble Supreme Court’s judgment in the case of Ind-Swift Laboratories (supra), the interest is chargeable from the date of credit taken in the Cenvat account by the appellant irrespective of the fact that the said credit was not utilized. Therefore, the interest under Section 11AB demanded by the lower authority and upheld by the Commissioner (Appeals) is maintained.
7. As regards appeal No. E/362/10, I find that the Cenvat amount of Rs. 25,706/- was wrongly availed and for which the show cause notice was issued proposing the demand of such amount and imposition of penalty and interest of Rs. 5,625/-. In the present case, the demand of duty was determined under Section 11A(2). Therefore, the penalty was rightly imposed and interest was also correctly demanded. Therefore, appeal No. E/362/10 is dismissed. Appeal No. E/361/10 is partly allowed.
(Pronounced in Court on 7-5-2015)
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