M/S. Sandoz Pvt. Ltd vs Commissioner Of Central Excise, Raigad

[Arising out of Order-in- Appeal No. US/231/RGD/2012 dtd. 11/4/2012 passed by the Commissioner of Central Excise (Appeals-II) Mumbai]

For approval and signature:

Honble Mr Ramesh Nair, 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 : 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. Sandoz Pvt. Ltd. : Appellants

VS

Commissioner of Central Excise, Raigad : Respondent

Appearance

Shri. Vinay Sejpal, Advocate for the Appellant Shri. Rakesh Goyal, Addl. Commissioner(A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 5/5/2015 Date of decision: 5/5/2015

ORDER NO.

Per : Ramesh Nair

This appeal is directed against Order-in- Appeal No. US/ 231/ RGD/2012 dtd. 11/4/2012 passed by the Commissioner of Central Excise (Appeals-II) Mumbai, wherein Ld. Commissioner(Appeals) has upheld the Order-in-Original No. Raigad/ADC/162/11-12 dated 17/1/2012 and rejected the appeal of the appellant. The fact of the case is that appellant has wrongly availed Cenvat Credit amounting to Rs. 6,31,914/- however the same was reversed on pointing out by the audit. As regard the admissibility of the credit, the appellant has reversed the credit and not contested on merit. However, appellant are contesting on the ground that the extended period should not have been invoked as there is no suppression of fact on the their part and appellant also contesting demand of interest under Section 11AB and penalty imposed under 11AC.

2. Shri. Vinay Sejpal, Ld. Counsel for the appellant submits that they are not contesting reversal of Cenvat Credit on merit however there is no malafide on their part for the reason that they had under bonafide belief and moreover they had accumulated balance of Cenvat Credit more than Rs. 4 crores in their Cenvat account, therefore there can not be any intention to wrongly avail a small amount of Rs. 6,31,914/- therefore demand is not sustainable on the ground of time bar. As regard interest he submits that as against credit of Rs. 6,31,914/- they had accumulated balance amount of Rs. 4 crores and disputed credit was not utilized till the date of reversal. He submits that interest is applicable only from date of utilization of the credit and not from the date of taking of the credit in the Cenvat account. In support of his argument he placed reliance on Commissioner of C. Ex. & S.T. LTU, Bangalore Vs. Bill Forge Pvt. Ltd [2012(279) E.L.T. 209(Kar.)] In view of the said judgment interest is reckoned from the date of utilization of credit and not from the date of credit entry taken into Cenvat account. As regard imposition of penalty under Section 11AC, he submits that since there is no malafide intention in taking such wrong credit on their part and they had accumulated balance of more than Rs. 4 crores which shows their banafide belief. In view of this position proviso to Section 11A(1) is not invokable and consequent penalty under Section 11AC also not imposable.

3. On the other hand, Shri. Rakesh Goyal, Ld. Addl. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings in the impugned order. He further submits that as regard wrong availment of credit on the input services, no information or details has been disclosed to the Revenue therefore Revenue has no occasion to know whether credit is admissible or otherwise. Wrong availment of credit was revealed only as a outcome of audit conducted by the audit officers therefore it is clear case of suppression on the part of appellant. Lower authorities have correctly invoked the extended period. As regard interest demand, he placed reliance on Honble Supreme Court judgment in the case of Union of India Vs. Ind-Swift Laboratories Ltd. [2011(265) E.L.T. 3(S.C.). As per this judgment interest is chargeable from the date of credit taken. He also refers to the Rule 14 of Cenvat Credit Rules, 2004 wherein it is clearly provided that interest shall be recovered where Cenvat Credit has been taken or utilized wrongly or has been erroneously refunded. In view of this unambiguous rule, interest is chargeable from the date of taking credit in to Cenvat account therefore interest was correctly demanded. As regard penalty he submits that since there is clear suppression of fact on the part of appellant is taking wrong credit, Section 11AC is unavoidably invokeable and penalty under Section 11AC was correctly imposed.

4. I have carefully considered the submissions made by both the sides and perused the record.

5. The appellant are not disputing wrong availment of credit through out proceedings however they are contesting the matter only on limitation, demand of interest and imposition of penalty under Section 11AC. I have observed that wrong availment of credit was pointed out by the audit officer during the audit. The availment of inadmissible credit was never disclosed by the appellant to the department before the audit therefore department was not in position to ascertain whether the credit taken by the appellant is correct or wrong. In view of this position it can be conveniently concluded that there is clear suppression of fact on the part of the appellant and therefore extended period was rightly invoked. Hence the demand of Cenvat credit is held to be sustained. As regard the demand of interest under Rule 14 read with Section 11AB. I have gone through Rule 14 which is reproduced below:-

14. Recovery of CENVAT credit wrongly taken or erroneously refunded.-

Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.

From plain reading of the Rule 14, it is very clear that interest is chargeable under Section 11AB where the Cenvat credit has been taken or utilized, wrongly refunded. In all the three stages i.e.  credit taken, credit utilized or wrongly refunded interest is chargeable. In the present case, since the appellant has taken wrong credit even though not utilized as per the above provision, interest is chargeable from the date of taking credit. Interpreting such statutory provision Honble Supreme Court in case of Ind-Swift Laboratories Ltd(supra) has correctly held that interest shall be chargeable from the date of taking credit. Ld. Counsel in the argument stated that this Apex Court judgment is on the issue of demand which is settled by Settlement Commission and same is not applicable hence liable to be distinguished. On this, I am of the view that simply because the case was settled by Settlement Commission interest provision will not vary, Rule 14 is applicable irrespective whether it is a case settled by Settlement Commissioner or otherwise therefore on this ground Honble Apex Court judgment can not be distinguished. I therefore held that the interest is chargeable from the date of taking credit in the Cenvat account of the appellant. As regard imposition of penalty under Section 11AC, as I held above extended period is rightly invoked and demand was also rightly confirmed by invoking proviso to Section 11A(1) the provision of Section 11AC would unavoidably attract and accordingly penalty under Section 11AC is sustainable. Even as per Honble Supreme Court judgment in the case of Dharamendra Textile processor[2008(231)ELT 3(SC)] penalty under Section 11AC neither can be waived nor can be reduced as it is in nature of mandatory penalty. Therefore, I do not find any infirmity in the impugned order and the same is upheld. The appeal is dismissed.

(Dictated in court)

Ramesh Nair Member (Judicial) sk

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