M/S Garden Silk Mills Ltd vs Commissioners Of Central Excise

[ Arising out of OIO-SUR-EXCUS-001-COM-68-13-14 dtd 31.12.2013 passed by Commissioners of Central Excise, Customs and Service Tax-SURAT-I ]

M/s Garden Silk Mills Ltd - Appellant(s)

Vs

Commissioners of Central Excise, Customs and Service Tax-SURAT-I - Respondent (s)

Represented by :

For Assessee : Shri Willingdon Christian, Advocate For Revenue : Shri J Nagori, Authorised Representative

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Honble Member (Technical)

1 Whether Press Reporter 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 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

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Honble Member (Technical)

Date of Hearing / Decision : 21/9/2015

ORDER No. A/11378 / 2015 dtd 21/9/2015

Per : Mr.P.M. Saleem,

The appellants are before us in the issue wherein Revenue has raised a demand on the appellants for wrong availment of Cenvat Credit on the ground that the invoices against which the cenvat credit availed shows the address of their Head Office whereas the cenvat credit was availed by one of the units. The Adjudicating Authority confirmed the demand of Rs 1,74,74,379/- alongwith interest and equal amount of penalty under Section 11AC vide the impugned order dated 31.12.2013.

2. Heard both sides and perused the relevant papers.

3. The Learned Counsel for the appellants states that they had reversed the Cenvat Credit on being pointed out by the audit before utilisation. He submits that the Cenvat Credit was never utilized and they had sufficient Cenvat Credit in their account till the time of reversal of the same and therefore interest is not payable by them in view of the decisions of Honble Supreme Court in the case of UOI vs Ind-swift Laboratories Ltd - 2011(265) ELT.3 (SC), of the Honble Gujarat High Court in the case of CCE Vs Dynaflex Pvt Ltd  2011(266)ELT.41 (Guj.), and also by the decisions of Honble High Courts of Bombay and of Karnataka. He also submits that there is no reason to impose penalty under Section 11AC as there was no suppression in this matter. They are duty paying assessee and filing returns and has taken Cenvat Credit in one of the units eligible for the same. He also submits that they had readily reversed the credit on being pointed out the irregularity.

4. The Learned Authorised Representative for the Revenue strongly refutes the arguments of the Learned Counsel and submits that the appellants had reversed the Credit only after the audit pointed out the same and after persuasion by the officers. He also submits that on the issue of interest, there are other decisions by the Honble High Court of Madras and also decision of the Honble Tribunal. He also counters the Citations made by the Learned Counsel. He submits the Apex Courts decision in Ind-Swift Laboratories Ltd (supra) is in the favour of Revenue stand. He also cited the decision of Honble Madras High Court in the case of CCE, Chennai Vs Delphi TVS Diesel Systems Ltd  2015(322)ELT.279 (Mad.) and decision of this Honble Tribunal in Force Motors Ltd vs. CCE., Pune  2015.TIOL.1833.CESTAT.Mum. The Learned Authorised Representative strongly argued that if the audit had not pointed out the wrong availment of cenvat credit, it would have resulted in short levy and by simple filing returns by itself will not rescue the appellants from the mischief of suppression.

5. We find that the appellants had taken cenvat Credit on the basis of invoices raised in the name of their Head Office. The said Cenvat Credit has been taken by one of their manufacturing unit. There is no allegation of double availment of the said Cenvat Credit by any other unit. It is also observed that the appellants had reversed the cenvat credit on being pointed out by the audit. The appellants have not seriously contested the necessity or correctness of reversal of the Cenvat Credit before the lower authorities. However, they are seriously contesting the levy of interest and penalty. On the issue of levy of interest, there are conflicting decisions by various Honble High Courts and different Benches of the Honble Tribunal. It is seen that the Honble High Court of Gujarat has observed in Para 7 in the case of Dynaflex Pvt Ltd (supra), as under:

 7.?In this regard it may be germane to refer to the decision of the Apex Court in the case of Commissioner of C. Ex. Mumbai-I v. Bombay Dyeing & Mfg. Co. Ltd., 2007 (215) E.L.T. 3 (S.C.), wherein it has held been that when an entry has been reversed before utilization the same amounts to not taking credit. Rule 14 of the Rules makes provision for recovery of interest where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded. Thus, both, in case where CENVAT credit has been wrongly taken or wrongly utilized, interest, is recoverable under Rule 14 of the Rules. However, in the light of the aforesaid decision of the Supreme Court, when the entry has been reversed before utilization, the same amounts to not taking credit. In the circumstances, where CENVAT credit is taken wrongly, but reversed before the same is utilized, it amounts to not taking credit. Accordingly, when no credit is taken, the provisions of Rule 14 of the Rules would not be attracted. The view adopted by the Tribunal as well as the authorities below is, therefore, in consonance with the view taken by the Supreme Court in the above referred decision.

6. We find that in this case the appellant had reversed the credit as soon as it was pointed out that they had wrongly availed the same and they had not utilised the Cenvat Credit so availed till the time of reversal of the same. Therefore, the decision of Honble Jurisdictional High Court relying upon the decision of the Honble Supreme Court on the very same issue is applicable in this case. We, therefore, hold that no interest is payable in the present case. On the issue of penalty under Section 11AC, it is seen that the same is not leviable as there were no intention to evade duty, as is evident from the facts of the case.

7. In the light of the above analysis, we set aside the demand of interest under the provisions of Rule 14 of Cenvat Credit Rules 2004, and penalty under Section 11AC of Central Excise Act 1944, Order In Original is upheld with the above modifications. The appeal is allowed on these terms.

(Dictated and pronounced in the open Court)

(P.K. Das) (P.M. Saleem) Member (Judicial) Member (Technical)

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