2) K. Palanisamy vs Commissioner Of Central Excise

[Arising out of Order-in-Appeal No.65-67/2007 CE (SLM) dated 24.12.2007 passed by the Commissioner of Central Excise (Appeals), Salem]

1) Aswin Textiles Pvt. Ltd. (now sought to be changed as R.S.Mills Private Ltd.)

2) K. Palanisamy Appellant

Versus

Commissioner of Central Excise, Salem Respondent

Appearance:

Shri M. Saravanan, Consultant For the Appellant Shr L. Paneer Selvam, AC (AR) For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing/decision :18.6.2015

FINAL ORDER No.40660-40661/2015

1. Appellant seeks to change the name of the appellant in the cause title from M/s.Aswin Textiles Pvt. Ltd. to R.S. Mills Pvt. Ltd. He produced copy of certificate from the Registrar of Companies dt. 14.12.2012. Accordingly, the prayer for change of cause title is allowed. MA is disposed.

2. Appellant M/s.R.S. Mills Pvt. Ltd. in Appeal E/139/2008 is represented by Shri M. Saravanan, Consultant. None is represented for Appellant Shri K. Palanisamy, in Appeal No. E/140/2008. Since the issue involved in these appeals is arising out of common impugned Order-in-Appeal, both are taken up together for disposal.

3. The short issue in this case relates to irregular availment of capital goods credit availed on the CVD paid on the imported capital goods cleared under EPCG licence where no CVD was paid. Appellant imported three machines and cleared EPCG licence @ concessional rate of 5% where CVD is exempted whereas the appellant availed credit of Rs.48,52,516/- as per the assessment of the Bill of Entry received in their factory located at Dharapuram. Adjudicating authority in his order confirmed the demand and also appropriated the duty already reversed by the appellant and also appropriated the interest amount and imposed equivalent penalty under Section 11AC and also imposed equivalent penalty on the co-noticee K.Palanisamy under Rule 26 of CER. The Commissioner (Appeals) upheld the demand but reduced the penalty imposed on the second appellant from Rs.48 lakhs to Rs.1 lakh. Hence the present appeals.

4. Ld. Consultant representing for the main appellant submits that their factory is located at Dharapuram and their Head office is located at Tiruppur and all the import and export clearances and payment of duties were handled at their head office. The capital goods are received in their unit at Tarapuram. He further submits that in the Bill of Entries cleared under the EPCG licence, it is clearly indicated the assessment details, Basic Customs Duty, CVD amount. Mr. K.Palanisamy in charge of administration at the factory had inadvertently took the credit of CVD on three Bills of Entry on the belief that CVD has been paid as per details given in the B/E which is a genuine mistake. Due to communication gap between the headoffice and the factory the lapse happened. As soon as it was detected by the internal officers who visited the factory on 12.1.2004 and on being pointed out by the audit, they immediately accepted and reversed the entire credit on 31.1.2004 and also paid the interest amount of Rs.6,20,739/- on 20.2.2004. Since the audit conducted verification and as per audit report they have complied with the report, they were under the bonafide belief that the issue was closed. He drew my attention to para-13 of Audit Manual of Excise Audit 2000 at page 6.139 wherein at para (13) it is stated that once the assessee agrees with the audit findings in full and assessee makes the payment audit para should be closed. Whereas instead of closing the audit report, the department initiated proceedings and the headquarters (Preventive) registered offence case and SCN was issued on 30.10.2006 on the ground of suppression of facts for imposing equivalent penalty under Section 11AC. This is a case clearly covered under Section 11A (2B) as clearly reflected in the audit manual. Section 11A (2B) authorises not only voluntary payment but so payment of duty as pointed by officers. Therefore, extended period of limitation is not invocable in this case and no penalty is imposable as they have duly complied with the report. The investigation did not led to any new facts or suppression as they have clearly admitted the mistake at the time of audit itself. Imposition of penalty is not warranted as they have already paid duty and interest as per audit objection. He relied on the following citations :-

(i) Hindustan Lever Ltd. Vs CCE Cochin 2004 (167) ELT 433 (Tri.-Bang.)

(ii) CCE Bangalore Vs Geneva Fine Punch Enclosures Ltd.

2011 (267) ELT 481 (Kar.)

(iii) Panasonic AVC Networks India Co. Ltd.

2012 (280) ELT 297 (Tri.-Del.)

(iv) CCE Vs Guarniflon India Pvt. Ltd.

2013 (293) ELT 703 (Tri.-Ahmd.)

5. On the other hand, Ld. A.R reiterates the findings of the impugned order as well as the adjudication order. As the goods were cleared without payment of CVD under EPCG licence, they have deliberately taken credit and utilised the same. Suppression of facts and intention to evade payment is established and it was paid only on being pointed out by the audit. The Managing Director and the Administrative officer have clearly admitted the mistake. Therefore penalty is imposable on both the appellants. Section 11A (2B) is not applicable as this is not a case of short-payment of duty. He relief on the following case laws :-

(i) Gulabchand Silk Mills Pvt.Ltd. Vs CCE Hyderabad 2005 (184) ELT 263

(ii) Amex Alloys Pvt. Ltd. Vs CCE Coimbatore 2013 (296) ELT 229

(iii) UOI Vs Rajasthan Spinning & Weaving Mills 2009 (238) ELT 3 (SC)

6. After hearing both sides, I find that the short issue relates to imposition of equal penalty on the appellant and penalty on co-noticee as the appellants have already paid the entire amount and also paid the interest. On perusal of the records, I find that entire issue of wrong availment of credit was detected by the officers of internal audit at the appellants unit. This is evident at para-4 of the OIO and para 6.4 of OIA wherein it is clearly recorded that officers visited the appellants unit for conducting internal audit of records on 12th, 13th & 14th January 2014 and detected lapse. It is also mentioned in the order that appellants have paid the entire amount on 31.1.2004 immediately on receipt of audit objection and also paid the entire interest amount of Rs.6,20,739/- on 20.2.2004. Therefore, it is evident from the above facts that the appellants promptly complied the audit objection. Whereas a SCN dt. 30.10.2006 issued by the Headquarters (Preventive) on the same issue which was detected by the audit. Apparently, the SCN was issued for imposition of penalty for which Section 11AC has been invoked. I find that audit detected the case on 12.1.2004 and appellants also admitted the audit objection before the officers pleading it is a genuine mistake.

7. It is relevant to see that the capital goods were cleared under EPCG scheme and even though no CVD is payable the Bill of Entry contained assessed value and B.C.D and C.V.D. calculated and mentioned in the said B/E. The CVD amount was quantified in the Bill of Entry by the Customs for the reason that in the event of non-fulfilment of EPCG licence the department has to recover customs duties forgone. The appellants plea that the person who was handling excise matter had mistakenly taken the CVD amount based on B/E details has some force for the reason importation of goods is handled at their head office located whereas the appellants unit is located in a different place at Dharapuram. It is relevant to state that under normal assessment of any B/E on regular imports, if CVD is exempted on any goods, the B/E itself specifically indicate the CVD is "NIL". Whereas in the present case considering the imports under EPCG and the circumstances explained above that the imports are handed by Head office and the goods received at the factory located oat different place, it is a bonafide mistake of the employee of the company who took the credit of CVD amount mentioned in the assessed Bill of Entry. There appears to be no suppression of facts with intention to evade payment of duty as alleged by Revenue. In this regard, I rely the Honble Karnataka High Court decision in the case of CCE Bangalore Vs Geneva Fine Punch Enclosures Ltd. (supra) where Section 11AC penalty has been set aside and held that as there is no deliberate intention to evade payment of duty. Para 5 & 6 of the said High Court's judgement (supra) are reproduced as under :-

"5.?As it is clear from Section 11-A after a notice is issued under Section 11(A)(C), the assessee has a right to make a representation contesting the claim. It is, thereafter, under Section 11(A)(2) the Central Excise Officer after considering the representation, if any, made by the person on whom notice is served, determining the amount of duty of excise due from such person and thereupon such person shall pay the amount so determined. Section 11A(C) makes it clear that the liability to pay the penalty arises on the person who is liable to pay duty as determined under sub-Section 2 of Section 11A.

6.?Therefore, the determination of liability to pay duty is a condition precedent for imposing penalty. If after demand of duty if the assessee without contesting the claim voluntarily pays the duty and interest payable thereon for the delay in payment of duty on the stipulated day, the question of the Officer determining the duty payable would not arise, It is only in cases duty is determined coupled with the fact that the duty is evaded by a reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, the liability to pay penalty arise. The Tribunal in the instant case on a careful consideration of the material on record has held firstly that there is no determination of duty. Secondly, the aforesaid requirement i.e., the cause of evasion of duty is not mentioned in the show cause notice. Further that the entire duty and interest was paid voluntarily on being pointed out. It held that no case for imposing the penalty is made out. The commissioner was in total error in passing the order and imposing the penalty. Under these circumstances, we do not find any infirmity in the order passed by the Tribunal. No substantial question of law involved in this appeal that arises for consideration. Hence, the appeal is dismissed."

This Tribunal on identical issue waived penalty in the case of Panosonic AVC Networks India Co. Ltd. Vs CCE Meerut (supra). Para-6 of the Tribunal decision is extracted as under :

"6.?I have carefully considered the submissions from both sides and perused the records. No doubt, the appellants are not eligible to take credit of special additional duties at 4% levied under Section 3(5) of the Customs Tariff Act, 1975. The submission on behalf of the appellants was that in view of nomenclature of the levy of additional duties in lieu of sales tax and local levies being additional duties they have taken credit bona fidely as they believed that all additional duties were eligible as credit. The submission deserves to be accepted. Further, as submitted by them, details of credit taken were furnished by them in the returns submitted by them. This is a fit case that the Department should have refrained from issuing show cause notice in terms of Section 11A(2B) of the Act. I do not find any mala fide in the conduct of the appellants. Therefore, the question of invoking the provisions of Section 11AC to impose a mandatory penalty does not arise. The decision of the Honble Supreme Court in the case of Rajasthan Spinning & Weaving Mills cited supra does not apply to the facts of the present case."

8. Therefore, the appellants case is squarely covered under Section 11A (2B) which stipulates not only voluntary payment of duty by the assessee but also any amount pointed out by the officers. In the instant case, it is evident that internal audit was conducted and the officers informed the appellant the irregular availment and directed the appellant to comply the audit para and the appellant complied immediately. I hold that there is no suppression of facts by the appellants with deliberate intention to evade duty. By respectfully following the decisions cited (supra) while upholding appropriation of demand and interest, I set aside Section 11AC penalty in respect of appellant M/s.Aswin Textiles Pvt. Ltd. (now changed as R.S.Mills Pvt. Ltd.)

9. As regards the co-noticee, original penalty of Rs.48 lakhs imposed by the adjudicating authority was reduced to Rs.1 lakh by the LAA. After considering the merits of the case, I do not find any merit for full waiver of penalty. Accordingly the reduced penalty of Rs.1 lakh imposed on the co-noticee is upheld. In the result, the first appeal is partly allowed. The second appeal is dismissed. Both the appeals are disposed in the above terms.

(Dictated and pronounced in open court)

(R. PERIASAMI) TECHNICAL MEMBER

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