M/S Heranba Industries Ltd vs Commissioner, Customs & Central ...

Appeal No.E/522-524/2011; E/337/2012 [Arising out of OIO No.08-MP-DAMAN-2010, dt.30.11.2010, passed by Commissioner, Customs, Central Excise & Service Tax, Daman]

1. M/s Heranba Industries Ltd 2. Shri Raghuram K. Shetty 3. Smt. Beena Thomas 4. Shri Prakash Gulabbhai Desai Appellants

Vs

Commissioner, Customs & Central Excise, Daman Respondent

Represented by:

For Appellants: Shri Kiran Sawale, Advocate For Respondent: Dr. Jeetesh Nagori, Addl.Commissioner (AR)

For approval and signature:

Honble Mr. P.K. Das, Member (Judicial) Honble Mr. H.K. Thakur, Member (Technical)

1. Whether Press Reporters may be allowed to see the No 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 of Seen the order?

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

CORAM:

HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) HONBLE MR. H.K. THAKUR, MEMBER (TECHNICAL)

Date of Hearing/Decision:04.03.2015

Order No. A/10201-10204/2015, dt.04.03.2015

Per: P.K. Das

1. These appeals are arising out of a common order and therefore, all are taken up together for disposal.

2. The relevant facts of the case, in brief, are that M/s Heranba Industries Ltd. (Appellant No.1) was engaged in the manufacture of Organic Chemicals and Agrochemicals, classifiable under Chapter 29 & 30 of Central Excise Tariff Act, 1985. During the course of audit for the period June 2004 to March 2007, the scrutiny of the CENVAT documents i.e. RG 23A Part II Register and CENVAT invoices, it was noticed that the Appellant No.1 had taken excess CENVAT Credit of Rs.1,04,09,699.00 and Rs.9,59,538.00. It was also noticed that they had availed CENVAT Credit on the basis of the xerox copies of invoices and bills of Entry. The Appellant reversed the credit of Rs.1,14,01,814.00 on 30.04.2007 and 14.05.2007.

3. A Show Cause Notice dt.09.05.2008 was issued, proposing to confirm the demand of CENVAT Credit of Rs.1,27,73,273.00 and to appropriate the amount of Rs.1,14,01,814.00, which was already paid by them. It has also demanded interest and to impose penalty on the Appellant No.1 and also to impose penalties on other Appellants. The Adjudicating Authority confirmed the demand of CENVAT Credit alongwith interest and also appropriated the amount deposited by them. It has also imposed penalties on other appellants. The matter went up to the Tribunal. The Tribunal by Final Order No.A/883-885/WZB/AHD/2010, dt.07.07.2010, remanded the matter to the Adjudicating Authority, with certain directions. By impugned order, in de-novo adjudication, the Adjudicating Authority disallowed the CENVAT Credit of Rs.1,27,73,273.00 alongwith interest and also appropriated an amount of Rs.1,14,01,814.00 as deposited by them and directed them to pay the remaining amount of Rs.13,71,459.00 alongwith interest. It has imposed penalty of equal amount of CENVAT Credit on the Appellant No.1 and penalties of Rs.5 lakhs, Rs.1 Lakh, and Rs.2 lakhs each were imposed on Shri Raghuram K. Shetty, Executive Director, Smt.Beena Thomas, Accounts Officer and Shri Prakash Gulabbhai Desai, Commercial Manager of the Appellant No.1. Hence, the appellants filed these appeals.

4. Learned Advocate on behalf of the Appellants submits that they have already reversed the credit of about Rs.1.14 Crores and also paid interest to the extent of credit utilized by them. He submits that the demand of interest on unutilized credit is not justified in view of the various decisions of High Court and Tribunal, as under:-

a) CCE Madurai Vs M/s Strategic Engineering (P) Ltd.

2014-TIOL-466-HC-MAD

b) CCE Vadodara-II Vs M/s Dynaflex Pvt.Ltd.

2012 (25) STR 277 (Guj.)

c) CCE Mumbai-I Vs M/s Bombay Dyeing & Mfg. Co. Ltd 2007 (215) ELT 3 (SC)

d) CCE Vs M/s Sweet Industries 2011 (264) ELT 349 (Guj.)

5. Regarding the reversal of credit of the balance amount of Rs.13,71,459.00, he submits that they have already got the three original copies of Bills of Entry/Invoice out of four. He submits that there is no suppression of facts with intent to evade payment of tax, as the credit was recorded in the CENVAT register. Smt. Beena Thomas, Accounts Officer in her statement before the officers, admitted that she has taken excess credit as she was not having the knowledge of Central Excise. Hence, the imposition of penalty under Section 11AC of Central Excise Act, 1944 is not warranted. Regarding the imposition of penalties on other Appellants, it is submitted that they are the employees of Company and therefore, imposition of penalties on other Appellants are not justified. They had no personal gain.

6. On the other hand, the learned Authorised Representative for the Revenue submits that the case laws relied upon by the Appellants are in the context whether the Appellant has utilized the credit. In the present case, they have utilized the credit and in some cases, the balance came down to about to Rs.5 lakhs as revealed from the Para 4.4.8 of the Adjudication order. He relied upon the decision of the Honble Supreme Court in the case of Union of India Vs M/s Ind-Swift Laboratories Ltd  2011 (265) ELT 3 (SC). He further submits that there is no reason for remand of the matters for verification of Bills of Entry/Invoice, for the reason that in the second round of litigation, they have not filed the documents with the appeal itself. He further submits that the Appellants deliberately had taken excess credit with intention to evade payment of tax, which was detected by the Central Excise officers during the audit and therefore, imposition of penalty under Section 11AC is warranted. He relied upon the decision of the Tribunal in the case of Pratam Fab Prcoessors Pvt. Ltd. Vs Commissioner of Central Excise, Thane-I  2013-TIOL-709-CESTAT-MUM. He submits that they have not contested the demand for extended period of limitation and therefore, the penalty under Section 11AC would be invoked. He further submits that the other Appellants are directly involved for availing excess credit and the penalties are warranted.

7. After hearing both the sides and on perusal of the records, we find that it is appropriate to reproduce the relevant portion of the remand order of the Tribunal as under:-

6. After hearing the learned SDR, we find that the appellants are not disputing confirmation of excess credit availed them. The challenge in the present appeal is only to interest and penalty. Law on the issue of interest stand declared by Tribunal in number of cases as reproduced above. Since the Commissioner has observed that the appellant has utilized the Modvat Crdit whereas it is the appellants contention that such credit was not utlised by them and at any point of time, the balance in their Modvat account was more than the credit so availed. On this limited issue, we are of the view that the matter needs to be re-examined by the Commissioner inasmuch as the same relates to factual verification. We, accordingly, set aside the impugned order and remand the matter to Commissioner for verification of the appellants claim on the above issue.

7. As we have already remanded the matter to Commissioner, he would also re-decide the question of rejection of claim of Rs.13,71,459/- in the light of the law declared by the Tribunal in relied upon judgments as also by taking into account the fact of production of 5 invoices in original.

8. The question of imposition of penalties would also be re-decided by him in the remand proceedings. Needless to say that the appellant would be given an opportunity to put forth their case and are at liberty to raise any legal issue on the disputed point.

8. We find that the Appellant had paid the excess availment of credit to the tune of Rs.1,14,01,814.00 before issue of the Show Cause Notice. They are not contesting the demand of the said amount. Regarding the demand of denial of CENVAT Credit of Rs.13,71,459.00, we find that the Appellant had not produced the original documents inspite of the remand order. We agree with the submissions of the learned Authorised Representative that they have not filed the original documents even before the Tribunal. During the course of hearing, after about 10 years, the learned Advocate just made submission before the Tribunal that they have got the original documents. We do not find any merit in the submissions of the learned Advocate. So, the demand of Rs.13,71,459.00 is justified.

9. Regarding the demand of interest, learned Advocate submits that they have utilized the credit partly and paid the interest thereon. On perusal of the impugned order, we find that the minimum balance in the CENVAT Credit to Rs.5,09,640.00. It is also noticed the decision relied upon by the learned Advocate is in the context, where the Assessee has not utilized the credit. In the present case, the Appellant utilized the credit as evident from CENVAT accounts and therefore, the decision relied upon by the Appellant would not be applicable in the present case. Hence, the demand of interest is also justified.

10. Regarding the imposition of penalty on the Appellant Company under Section 11AC of the Central Excise Act, 1944, we find that where the CENVAT Credit in respect of input and capital goods or input services has been taken or utilized wrongly by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of said Act or rules made thereunder, with intent to evade payment of duty, then the manufacturer shall also be liable to pay the penalty in terms of the provisions of Section 11AC of the Act. In the present case, it is seen that the Appellants are not disputing the denial of CENVAT Credit of about Rs.1.14 Crores, which they have paid before issue of Show Cause Notice. It is seen from the statement dt.20.12.2007 of Smt. Beena Thomas working as Accounts Officer-cum-Authorised Signatory of the Appellant Company, that whatever entries were made due to clerical mistake and due to heavy work load and the same has not been cross verified by Shri Prakash Gulabbhai Desai. It was not made intentionally. Now, they have corrected the mistake by reversing the entire amount and started maintaining Central Excise record in proper way. She also stated in answer of other question that error was committed due to heavy workload and Shri Prakash Gulabbhai Desai never cross verified the CENVAT entries. Shri Prakash Gulabbhai Desai in his statement dt.11.09.2007, stated that Smt. Beena Thomas who was his assistant in Central Excise work and Authorised Signatory also for the said purpose and had made the entries in the CENVAT account. It is also stated that she was directly under Shri R.K. Shetty and she used to report day to day activity including Central Excise. The excess availment of CENVAT Credit do not appear to be taken deliberately after going through the statements and records. It is a clear statement that Shri R.K. Shetty had not directed her to avail any excess credit.

11. Keeping into account overall facts and circumstances of the case, we do not find any material that excess availment of credit was made with intention to evade payment of duty. The case law in the case of Pratam Fab Processors Pvt. Ltd (supra) as relied upon by the learned Authorised Representative would not be applicable in this case. In that case, two Show Cause Notices were issued to the Appellant for excess availment of credit. It is seen that there was an intention on the part of the Appellant to evade payment of tax. So, in the present case, imposition of penalty under Section 11AC of the Act, would no be warranted. The nature of availment of excess credit as revealed from the statement of Smt.Beena Thomas, that in some cases, they have availed the credit on the assessable value to the extent of Rs.1.04 Crores. The Appellant had taken credit twice on the same invoice. Taking into account of the conduct of the Appellant for excess availment of credit for more than Rs.1 Crores, we find that it is a fit case to impose penalty under Rule 15(1) of CENVAT Credit Rules, 2004. Regarding the penalty imposed on other Appellants, we find that they are the employees of the Appellant Company. There is no evidence of direct involvement of the Appellant for excess availment of credit deliberately. Hence, in our view, the imposition of penalties on other Appellants are not warranted.

12. In view of the above discussions, the disallowance of CENVAT credit along with interest is upheld. The penalty on the Appellant No.1 is reduced to Rs.10 lakhs (Rupees Ten Lakhs only). The imposition of penalties on other Appellants are set aside. The impugned order in respect of Appellant No.1 is modified accordingly. The appeal filed by the Appellant Nos. 2, 3 & 4 are allowed. The appeal filed by the Appellant No.1 is disposed of in above terms.

(Dictated & Pronounced in Court)

(H.K. Thakur) (P.K. Das) Member (Technical) Member (Judicial)

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