Beml Ltd vs Commissioner Of Central Excise ...

[Arising out of Order-in-Appeal No. 40-2012 dated 22/02/2012 passed by CCE(Appeals-I), Bangalore]

For approval and signature:

HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

BEML LTD BEML NAGAR, KGF-563115 Appellant(s)

Versus

Commissioner of Central Excise ,Customs and Service Tax BANGALORE-I NULL POST BOX NO 5400...CR BUILDINGS, BANGALORE, - 560001 KARNATAKA Respondent(s)

Appearance:

Ms. Preetha, Advocate For the Appellant

Shri Mohd. Yousuf, Addl. Commissioner(AR) For the Respondent

Date of Hearing: 16/09/2015

Date of Decision: 16/09/2015

CORAM:

HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER

Final Order No. 21940 / 2015

Per : ASHOK K. ARYA

Both the parties have been heard in detail.

2. The matter concerns the liability of the interest on the CENVAT credit taken for the inputs which had been sent for job work and were not returned within 180 days as per Rule 4(5)(a) of the CENVAT Credit Rules 2004 (the Rules for short). The appellant reversed the CENVAT credit when the goods had not come back from the job work manufacturers within the period of 180 days. The respondent viz. Commissioner of Central Excise, Customs and Service Tax, Bangalore-I caused the appellant to pay interest on the said reversed amount of CENVAT credit. During adjudication, an equivalent amount of penalty of Rs.8,357/- was also imposed on account of the credit wrongly taken for the goods which had not been returned by the job workers within the period of 180 days.

2. The learned advocate Ms. Preetha appearing for the appellant mentions that there has been an amendment in the year 2015 in the Explanation II to Rule 4(7) whereby in place of the word sub-rule, the word rule has been substituted regarding the recoveries to be made under Rule 14 of the Rules. She further argues that therefore, the recovery under Rule 14 earlier to 2015 amendment could be made with reference to only sub-rule 7 of Rule 4 of the Rules using the provisions of Rule 14 of the Rules.

3. The learned advocate for the appellant refers to the decision of the Honble Karnataka High Court in the case of CCE&ST,LTU, Bangalore Vs. Bill Forge Pvt. Ltd. [2012(279) ELT 2009 (Kar.)] and the decision of the Honble Madras High Court in case of CCE, Madurai Vs. Strategic Engineering (P) Ltd. [2014(310) ELT 509 (Mad.)]. She says that these two case laws specifically held that interest and penalty are not liable to be recovered when CENVAT credit was wrongly taken but not utilised.

4. The learned AR Shri Mohammed Yousuf has argued that interest and penalty are always recoverable both for the periods prior to the said amendment made in 2015 and also after the said amendment made in the Explanation to sub-rule 7 of Rule 4 of the Rules, wherever CENVAT credit has been wrongly taken or utilised by an assessee. The learned AR cites Honble Supreme Courts decision in the case of UOI Vs. Ind-Swift Laboratories Ltd. [2011(265) ELT 3 (SC)] wherein it was held that interest is recoverable wherever CENVAT credit has either been taken wrongly or utilised wrongly.

5. I have carefully gone through the facts of the case and also the pleadings made by both the parties. I find that Honble Karnataka High Court as well as Honble Madras High Court in the cases quoted above have considered the decision of Honble Supreme Court made in the case of UOI Vs. Ind-Swift Laboratories Ltd. and have come to the conclusion that wherever CENVAT credit has wrongly been taken but not utilised, the interest is not payable. The Honble Karnataka High court in the said decision says that before utilisation of credit if the entry has been reversed, it amounts to not taking credit. The Honble High Court in the said decision in para 20, inter-alia, says as below:-

20. . . .Therefore, this is a procedure whereby the manufacturers can utilise the credit to make payment of duty to discharge his liability. Before utilization of such credit, the entry has been reversed, it amounts to not taking credit. Reversal of cenvat credit amounts to non-taking of credit on the inputs.

5.1. The Honble Madras High Court in the case quoted earlier says that in the cases where CENVAT credit though wrongly taken not utilised, interest and penalty cannot be recovered from assessee. The Honble High Court of Madras has, inter-alia, stated in the above decision in para 11 as below:-

11.?It is an admitted fact that Rule 14 of the Cenvat Credit Rules as been subsequently amended, wherein it has been clearly stated as taken and utilised. Therefore, it is quite clear that mere taking itself would not compel the assessee to pay interest as well as penalty. Further, as pointed out earlier, the subsequent amendment has given befitting answer to all doubts existed earlier. Since, the subsequent amendment has cleared all doubts existed earlier in respect of Rule 14 of the said Rules, it is needless to say that the argument advanced by the learned counsel appearing for the appellant/Department is erroneous, whereas the argument advanced on the side of the respondent is really having merit and the substantial questions of law settled in the present Civil Miscellaneous Appeal are not having substance and altogether the present Civil Miscellaneous Appeal deserves to be dismissed.

6. Based on the facts on record, discussions made above and the decisions of the Honble High Court of Karnataka and Honble High Court of Madras quoted above, the appeal is allowed with consequent relief, if any.

(Order pronounced and dictated in open court)

ASHOK K. ARYA TECHNICAL MEMBER

Raja.

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