M/S Bajaj Auto Ltd vs Commr C Ex & St (Ltu), Mumbai

[Arising out of Order-in-Appeal No. SB/56/LTU/MUM/2010 dated 26.03.2010 passed by the Commissioner (Appeals) Central Excise & Service Tax (LTU), Mumbai].

For approval and signature:

Honble Shri M.V. Ravindran, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy : Seen of the order?

4. Whether order is to be circulated to the Departmental : Yes authorities? ======================================================

M/s Bajaj Auto Ltd. Appellant

Vs.

Commr C Ex & ST (LTU), Mumbai Respondent

Appearance: Mr. Makrand Joshi, Advocate for Appellant

Mr. Ashutosh Nath, Asstt. Commr. (AR) for Respondent

CORAM: HONBLE SHRI M.V. RAVINDRAN, MEMBER (JUDICIAL)

Date of Hearing: 08.06.2015

Date of Decision: 08.06.2015

ORDER NO.

Per: Shri M. V. Ravindran, Member (Judicial)

1. This appeal is directed against Order-in-Appeal No. SB/56/LTU/MUM/2010 dated 26.03.2010.

2. Relevant facts that arise for consideration are, appellant is engaged in the manufacture of excisable goods, falling under Chapter-87 and are availing Cenvat Credit under Cenvat Credit Rules, 2004. It was observed that the appellant has fraudulently availed Cenvat Credit on invoices without receipt of goods. The appellant reversed the Cenvat Credit of Rs.6,15,051.19 on being pointed out by departmental officers, but a show cause notice was issued. Appellant contested the demand of interest and pleaded for non-imposition of penalty. Adjudicating authority after following the due process of law confirmed the demand and appropriated the amount paid by the appellant, demanded interest and also imposed equivalent penalty. Appellant preferred an appeal. The first appellate authority did not accept the contentions and upheld the Order-in-Original.

3. Learned Advocate, appearing on behalf of appellant, submitted that the wrong availment of Cenvat Credit was due to fraud of an employee of the appellant. He would submit that the appellant has lodged a FIR against the said employee and issue is pending. He would submit that they have not paid the interest only for the reason that the Cenvat Credit wrongly availed, was not utilized. He would submit that the penalty is not to be imposed as there was no intention to avail wrong credit by the company.

4. Learned departmental Representative on the other hand could draw my attention to the findings on the fact by the lower authority. He would submit that fraudulent act of an employee, that too of a manager level employee, needs to be attributed to the appellant company and penalty imposed are correct. He reiterated the findings of lower authority and relay upon the decision of Allahabad High Court in the case of CCE V/s M/s Chaudharana Steel Pvt. Ltd. [2012-TIOL-38-HC-ALL-CX].

5. I have considered the submission made by the both sides and perused records.

6. The issue involved in this case is regarding the imposition of equivalent penalty under Rule 15 of the Cenvat Credit Rules, 2004, read with Section 11AC of Central Excise Act, 1944 and demand of interest under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11AB of Central Excise Act, 1944.

7. On perusal of records, it transpires that there is no dispute as to the facts, that one of the employee of the appellant has engaged himself in fraudulent act, so as to enrich himself, by availing Cenvat Credit on the invoices raised by the supplier without receipt of inputs. It is to be noted that the appellant company had lodged a FIR on 23.01.2007 against the said employee with local police station. At the outset, I would record that the interest liability needs to be discharged by the appellant as per Rule 14 of Cenvat Credit Rules, 2004. The liability arises even if the improperly availed Cenvat Credit is not utilized, as per law settled by the Supreme Court. Accordingly, I uphold the interest liability on the appellant and direct them to pay the same within 30 days, on being informed by lower authority or their own ascertainment.

8. As regards the penalty of an amount equivalent to the confirmed demand, I find that there is no dispute as to the fact, that the employee of the appellant company was involved in fraudulent act for his personal gain. The act of the individual employee in availing improper Cenvat Credit cannot be attributed to appellant as a mala-fide act, as the act of fraud admittedly is not authorized and can never be authorized by the management of the appellant company. In my considered view, equal penalty imposed is unwarranted. In view of the foregoing, in the facts and circumstances in this case, I set aside the equal penalty imposed on the appellant company.

9. The appeal is disposed of as indicated hearing above.

(Dictated in Court)

(M.V. Ravindran) Saifi Member (Judicial)

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