Maytas Infra Ltd vs Commissioner Of Central Excise, ...

[Arising out of Order-in-Appeal No. 84/2010 dated 21/10/2010 passed by the Commissioner of Customs, Central Excise and Service Tax, Hyderabad-II ]

For approval and signature:

HON'BLE Mr. B.S.V. MURTHY, TECHNICAL MEMBER

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

Maytas Infra Ltd. 3rd Floor, Amogh Plaza, Begumpet, Hyderabad  500 004 Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax Hyderabad-II L.B Stadium Road, Basheerbagh, Hyderabad - 500 004 Andhra Pradesh Respondent(s)

Appearance:

Mr. B. Venugopal, Advocate Swamy Associates G-8, Fortuna Icon Apartments, Jodidhar Aswathappa Farm, Behind Nagarjuna Nagar, Sahakar Nagar, Bangalore  560 092 Karnataka For the Appellant

Mr. N. Jagdish, AR For the Respondent

Date of Hearing: 20/03/2015 Date of Decision: 20/03/2015 CORAM:

HON'BLE Mr. B.S.V. MURTHY, TECHNICAL MEMBER

Final Order No. 20839 / 2015

Modern technology and the computers are affecting law enforcement and implementation of law and the present issue is an example of the same.

2. During audit of the accounts of appellants M/s. Maytas Infra Ltd., some cases of irregular availment of cenvat credit were noticed by the audit party and the appellants agreed with whatever was suggested by the audit party and reversed the cenvat credit taken along with interest. The details have been tabulated in the show-cause notice and the learned counsel for the appellants explained each item of the credit.

a) Appellant had availed cenvat credit on motor vehicles falling under Chapter 87 amounting to Rs. 2,83,562/- (Rupees Two Lakhs Eighty Three Thousand Five Hundred and Sixty Two only). The learned counsel agrees that this was wrongly taken by mistake.

b) An amount of Rs. 5,20,474/- (Rupees Five Lakhs Twenty Thousand Four Hundred and Seventy Four only) being cenvat credit availed on input services received from abroad was held to be inadmissible. The learned counsel submitted that appellant was eligible for the credit but nevertheless did not want to contest the issue and accepted the views of the audit party and reversed it.

c) An amount of Rs. 17,90,242/- (Rupees Seventeen Lakhs Ninety Thousand Two Hundred and Forty Two only) being the cenvat credit used exclusively for exempted services was held to be irregular and the appellant accepted the observation and reversed it with interest. Learned counsel submitted that this was a mistake on the part of the appellant and they had not noticed that they were simply taking credit without segregating the same properly.

d) An amount of Rs. 1,73,442/- (Rupees One Lakh Seventy Three Thousand Four Hundred and Forty Two only) was agreed to have been wrongly taken since during the relevant time output service was not taxable and the services could be identified as the one used for such service. The learned counsel submitted that this was a mistake on the part of the appellant. Total amount came to Rs. 27,67,720/- (Rupees Twenty Seven Lakhs Sixty Seven Thousand Seven Hundred and Twenty only) which was promptly paid and interest was also fully paid before issue of show-cause notice.

3. Thereafter show-cause notice was issued for demanding the cenvat credit wrongly availed treating the amount paid towards wrongly availed cenvat credit and interest and imposition of penalty.

Paragraph 5 of the show-cause notice reads as under:

5. The assessee has availed credit irregularly with an intention to evade payment of service tax. The issue of irregular availment has come to the notice only after the accounts of the assessee were audited. M/s. Gland has not disclosed the same in their returns filed with the Department. In view of the above, the cenvat credit irregularly availed by the assessee is to be disallowed under Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 73(1) of the Finance Act 1994. 3.1. It can be seen that this is the paragraph which is the foundation for confirming the demand invoking extended period for wrongly availed cenvat credit, demand for interest and imposition of penalty under Rule 15 read with Section 78 of Finance Act 1994. In this paragraph it has been stated that M/s. Gland has not disclosed the details. Therefore the appellant could have easily contested this saying that if Gland has not disclosed the details how can appellant be liable to pay back the cenvat credit and interest and penalty. However the appellant has accepted it as a typographical error and this issue has never been raised.

3.2. Further it is also seen that in paragraph 7(iv), the show-cause notice proposes why penalty should not be imposed on the amount of Rs. 27,67,720/- under Rule 15(4) of Cenvat Credit Rules 2004 read with Section 78 of the Finance Act 1994.

3.3. The appellants had contended before the original authority and had cited several decisions to support the submission that since they have paid the eligible credit with interest before issue of show-cause notice, the penalty under Section 78 is not leviable on them. Paragraph 23 takes note of this submission and decisions relied upon by the appellant in the order-in-original. However in the very next paragraph the original authority has relied upon the Boards Circular which is purely relevant to interest alone. For better appreciation paragraph 24 of the order-in-original is reproduced:

24. As discussed previously, the Board in its Circular No. 897/17/2009-CX dt. 03.09.2009 that since the Rule 14 of the Cenvat Credit Rules, 2004 is clear and unambiguous in the position that interest would be recoverable when cenvat credit is taken and utilized wrongly, it is clarified that interest shall be recoverable when credit has been wrongly taken, even if it has not been utilized, in terms of wording of the present Rule 14. As I am bound by the above Board Circular, I am fully convinced that interest under Rule 14 read with Section 75 of the Act, is payable by them. Rule 15(1) of the Cenvat Credit Rules, 2004 says if any person takes cenvat credit in respect of inputs and capital goods wrongly or in contravention of any of the provisions of Cenvat Credit Rules, such person shall be liable to a penalty. Hence, I proceed to levy penalty under Section 78 of the Act, as the assesses have availed credit irregularly and such irregularity could not have not come to the notice of the Department but for audit of the accounts. As I intend to levy penalty under Section 78 of the Act, I abstain from invoking Section 76 of the Act, as per proviso to Section 78, which reads as that if the penalty is payable under this Section, the provisions of Section 76 shall not apply.

3.4. There is absolutely no discussion as to why he is agreeing with the submission that once the amount of irregular cenvat credit has been reversed with interest no penalty is leviable. He is only talking about interest as can be seen by the paragraph. Subsequently he reproduced the proviso to Rule 15(1) and says that he proceeds to levy penalty under Section 78 of the Act. However the penalty was imposed under Rule 15(4) of Cenvat Credit Rules not under Rule 15(1). Rule 15(1) proposes no mandatory penalty whereas Rule 15(4) of Cenvat Credit Rules 2004 proposes mandatory penalty. He is citing Rule 15(1) but imposing penalty under Rule 15(4) read with Section 78 of Finance Act 1994. In the whole paragraph there is no observation as to the relevance of the decisions cited, whether the decisions are considered or not and why the penalty is being proposed and what exactly of the provisions in Section 73 relating to suppression and under what circumstances penalty under Rule 15 can be imposed even if the amount has been paid before issue of show-cause notice.

3.5. In the order-in-appeal, the observations relating to decisions are contained in paragraph 8. For better appreciation the paragraph is reproduced.

8. As regards imposition of penalty of Rs. 27,67,720/- (Rupees Twenty Seven Lakhs Sixty Seven Thousand Seven Hundred and Twenty only) equivalent of irregular Cenvat credit availed by the appellants, they contended that though they might have availed certain credits for which they are ineligible, such act of availing the credit is not with intention to evade any tax. They immediately reversed the credit to the tune of Rs. 27,67,720/- (Rupees Twenty Seven Lakhs Sixty Seven Thousand Seven Hundred and Twenty only) on being informed by the Audit Officers. The lower authority in the impugned order held that it is clear in the Cenvat Credit Rules, 2004 the Rule 15(1) says if any person takes Cenvat Credit in respect of inputs and capital goods wrongly or in contravention of any of the provision of Cenvat Credit Rules, such person shall be liable to a penalty. He further held that, I proceed to levy penalty under Section 78 of the Finance Act 1994 as the assesses have availed credit irregularly and such irregularity could not have come to the notice of the department but for audit of the accounts. I concur with the view of the lower authority and hold that the appellants are liable for penalty under Rule 15(4) of Cenvat Credit Rules, 2004, read with Section 78 of the Finance of Act, 1944 as they also contravened the provisions of the Finance Act, 1994 and Rules made there under by availing cenvat credit irregularly. In this regard, it would be pertinent to refer to the findings of the Honble Tribunal in the case of CCE, Ludhiana Vs. Star Cargo Consultant [2009 (15) STR 43 (Tri.-Del.)], the relevant portion of which is as follows: I agree that waiver of penalty cannot be granted just because the service tax had been paid prior to the issue of show cause notice. But if the non-payment of service tax was due to some bona fide reason on the part of the assessee and the assessee on being pointed out paid the service tax, the waiver of penalty under Section 76, 77 or 78 would be merited. Here also the Commissioner (Appeals) is agreeing with the views taken by the original authority that penalty is imposable under Rule 15(1) and the original authority is right in imposing penalty under Rule 15(4) read with Section 78 of Finance Act 1994. He has also not considered any of the aspects as mentioned by me in the case of order-in-original.

4. This is a case where the statutory provisions have not been considered, the foundation for levy of penalty and demand of credit, interest etc. does not even contain the name of the party and it is not necessary to go into all omissions and commissions which exist in the proceedings. In this case I find that penalty under Section 78 can be set aside by invoking provisions of Section 80 of Finance Act 1994 in view of the fact that the appellant definitely did not have any intention to evade tax which comes out clearly from the reversal of credit without any question as to the correctness of the observations of the audit party with interest. Apparently the appellant wanted to close the issue and do not enter into a litigation. Nevertheless litigation has been commenced by the Revenue and even while doing so in the case of a demand for more than Rs. 27 Lakhs (Rupees Twenty Seven Lakhs approximately), the cut and paste procedure has been adopted resulting in a wrong name mentioned in the show-cause notice. Further even the statutory provisions have not been considered and decisions cited have not been discussed. Even then even before me the submission was only a request to invoke Section 80 of Finance Act 1994 and waiver of penalty. The observations made regarding statutory provisions have arisen as a result of the reading of the documents during the course of hearing and not because the appellants wanted or raised deficiencies in the orders of lower authorities.

5. In the above circumstances, I consider that this is a fit case for waiver of penalty under Section 80 of Finance Act 1994 and accordingly penalty imposed on the appellant are set aside. The demands for cenvat credit and interest thereon have not been contested and therefore the same are upheld as not contested.

(Order pronounced and dictated in open court)

(B.S.V. MURTHY) TECHNICAL MEMBER

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