Commissioner Of Central Excise vs M.R.F. Ltd

[Arising out of Order-in-Appeal No.7 & 12/2006 (M-IV) dt. 21.1.2006 passed by the Commissioner of Central Excise (Appeals), Chennai]

Commissioner of Central Excise, Chennai-III Appellant

Versus

M.R.F. Ltd. Respondent

Appearance:

Shri B. Balamurugan, AC (AR) For the Appellant Shri N.Nagarajan, DGM (AR) For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing/decision :24.4.2015

FINAL ORDER No.41008/2015

Revenue filed appeal against the Commissioner (Appeals) order dt. 21.1.2006

2. The issue relates to reversal of cenvat credit and consequent demand of interest. The respondents have availed cenvat credit of CVD paid in cash under DEPB scheme in terms of para 4.3.5 of Foreign Trade Policy 2002-2007 read with Customs Notification 45/2002 dt. 22.4.2002. However, consequent on the amendment in the Export Policy, the respondents are not eligible to avail cenvat credit. The appellants have already reversed the credit of Rs.50,000/- and Rs.17,58,244/-. However, the adjudicating authority issued SCN demanding interest on the irregular availment of cenvat credit and confirmed the interest of Rs.50,827/- under Rule 12 read with Section 11AB and also imposed penalty of Rs.10,000/-. On appeal, the Commissioner (Appeals) by relying on Tribunals Larger Bench decision set aside interest and penalty. The said order was reviewed by the department and filed the present appeal seeking to restore the order of the adjudicating authority confirmed the demand of interest and the penalty.

3. Heard both sides. Ld. A.R reiterates the grounds of appeal. The adjudicating authority has rightly demanded interest whereas the appellants have availed not only availed credit but also used the same for payment of duty till they finally reversed the credit. Therefore, interest is rightly demanded. He relied on the following case laws :-

(i) CCE Chennai-IV Vs Sundaram Fasteners Ltd.

2014-TIOL-20SC-MAD-CX

(ii) UOI Vs Ind-Swift Laboratories Ltd.

2012 (25) STR 184 (SC)

4. On the other hand, Ld. Advocate for the respondent reiterates the findings of the impugned order and also cross objections. He submits that the CVD credit availed in March 2004 and September 2004 were not utilized it was remaining in the balance and immediately they reversed the credit in Nov04. Therefore, the Commissioner (Appeals) has rightly set aside the interest and penalty. He relied on the following decisions :-

(i) Gestamp Sungwoo automotive (Chennai) Pvt. Ltd Vs CCE Chennai-IV 2014 (36) ELT 451 (Tri.-Chennai) (ii) Gurmehar Construction Vs CCE Raipur 2014 (36) STR 545 (Tri-Del.) (iii) CCE Bangalore Vs Gokaldas Images (P) Ltd. 2012 (28) STR 214 (Kar.)

(iv) CCE Madurai Vs Strategic Engineering (P) Ltd. - 2014-TIOL-466-HC MAD-CX

(v) CCE LTU Bangalore Vs Bill Forge Pvt. Ltd. 2011-TIOL-799-HC-KAR-CX

5. After hearing both sides, I find that the issue in this appeal only relates to demand of interest on the credit already reversed by the appellant. The adjudicating authority has demanded credit interest of Rs.50,827/- and imposed penalty of Rs.10,000/- which was set aside by the Commissioner (Appeals) in the impugned order. On perusal of the order, I find that the LAA by relying on the Tribunals decisions against TATA Motors Ltd. Vs CCE Jamshedpur  2005 (120) ECR 371 (Tri.-Kolkata) and Gokulam Spinners Vs CCE  2005 (98) ECC 457 (Tri) and other decisions had allowed the appeal and set aside the interest and penalty. In this regard, I find that the Tribunals Principal Bench at Delhi on identical issue in the case of Gurhmehar Construction Vs CCE Raipur (supra) had allowed the appeal by relying Honble High Courts decision in the case of Commissioner Vs Bill Forge Pvt. Ltd.  2012 (26) STR 204 (Kar.) and also distinguished the Supreme Court in the case of UOI Vs Indo-Swift laboratories Ltd. - 2012 (25) STR 184 (SC). The relevant paragraphs of the Tribunal's Principal Bench decision are reproduced below :-

"7.?It is seen that the Honble Karnataka High Court in the case of M/s. Bill Forge Pvt. Ltd. has discussed and considered the judgment of Honble Supreme Court in the case of M/s. Indo-Swift Laboratories (supra) in quite some detail in Paras 16 to 20 and then goes on to enumerate the principle of charging interest in Para 21 which is quoted below :-

21.?Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of Cenvat credit and that the interest would be payable from the date Cenvat credit is taken or utilized wrongly. Thus, the averment by the Honble Single Member of CESTAT in case of Dr. Reddys Laboratories Ltd. (supra) that the Honble Karnataka High Court has been rather careless while considering and analyzing the judgment of the Honble Supreme Court in case of M/s. Indo-Swift Laboratories Ltd. mainly on the basis of two small sentences viz. Actually the credit is taken at the time of removal of the excisable product. It is in the nature of set off or an adjustment is totally untenable particularly because, these sentences are in no way crucial for the conclusion arrived at by the Honble Karnataka High Court. Indeed, even if these sentences did not exist, the findings would not be affected either way as is evident from the holistic reading of Paras 16 to 20 of the said judgment. Further Honble Karnataka High Court judgment would not become incuriam merely because it has not discussed, analyzed or distinguished the judgment of the Honble Supreme Court in case of M/s. Indo-Swift Laboratories in a manner or to the extent some other Court would have chosen to do. Thus, we find that the said judgment of the Honble Karnataka High Court cannot be held to be per incuriam even from a liberal stand point.

8.?Coming to the judgment of the CESTAT, Mumbai in case of M/s. Balmer Lawrie (supra), it is seen that the distinction is sought to be made on the ground that the facts are different. The Honble CESTAT is Para 5.2 inter alia states as under :

The reliance placed by the appellant on the decision of the Honble Karnataka High Court in the case of Bill Forge Pvt. Ltd. (supra) and the other decisions will not apply to the facts of the present case. In the case of Bill Forge Pvt. Ltd. (supra) appellant therein took the credit and also reversed the credit within the same month i.e. before any liability to pay any duty arose. Thus what is contended is that the Karnataka High Court judgment (supra) would be applicable only when the credit is reversed within the same months i.e. before any liability to pay duty arose. It is difficult to accept that this distinction in the facts is of any consequence because (i) within the same month is not necessarily equivalent to before any liability to pay any duty arose because in a case where no clearances took place for several months, no liability to pay any duty would arise for several months, and (ii) in Rule 14 of Cenvat Credit Rules, 2004 there was no provision (implicit or express) which makes any distinction between reversal before utilization of wrongly taken Cenvat credit within the same month (or before the liability to pay any duty arose) or otherwise. Thus, reversal before utilization of wrongly taken Cenvat credit within the same month or before any liability to pay duty arose in no way affects or impacts the reasoning or principle contained in the judgment of Honble Karnataka High Court is the case of Bill Forge Pvt. Ltd. It needs to be stated that when a judgment is sought to be distinguished on the grounds of different facts, it has to be brought out that the difference in the facts is such as would have material effect on the findings (and basis of those findings) contained in the judgment sought to be distinguished. The differences in facts pointed out by the Honble CESTAT Mumbai in case of M/s. Balmer Lawrie (supra) do not have any such implication.

9.?The Honble Karnataka High Court in the case of M/s. Bill Forge Pvt. Ltd. (supra) after taking due note of the judgment of Honble Supreme Court in the case of Indo-Swift Laboratories Ltd. (supra) concluded in Para 21 as under :-

21.?Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax, there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of Cenvat credit and that the interest would be payable from the date Cenvat credit is taken or utilized wrongly. 8A.?Indeed, it is not merely out of courtesy that we should abide by the judgment of Honble Karnataka High Court in the case of M/s. Bill Forge Pvt. Ltd. (supra); the judicial discipline so demands and we are legally bound by it in the absence of any judgment to the contrary of any other Court equivalent or superior to the Honble Karnataka High Court."

6. Further, the Honble Karnataka in the case of CCE Bangalore-II Vs Gokaldas Images (P) Ltd. (supra) reaffirmed the decision in the case of Commissioner Vs Bill Forge Pvt. Ltd. (supra) and dismissed the Revenues appeal. I find that the ratio of the Tribunals decision and the Honble High Court decisions (supra) are squarely applicable to the present case. Therefore, I hold that respondents are not liable for interest on the credit already reversed. Accordingly, the impugned order is upheld and the Revenues appeal is rejected. Cross objection filed by respondent is disposed.

(Operative part of the order pronounced in open court on 24.4.2015)

(R. PERIASAMI) TECHNICAL MEMBER

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