Precious Plasto Packing Pvt. Ltd vs Commissioner Of Central Excise, Thane ...

[Arising out of Order-in-Appeal No. SB/02/TH-II/09 dtd. 16/6/2009 passed by the Commissioner (Appeals) of Central Excise, 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? =======================================================

Precious Plasto Packing Pvt. Ltd. : Appellants

VS

Commissioner of Central Excise, Thane -II : Respondent

Appearance

Shri. R. Sundaram, Advocate for the Appellant Shri. H.M. Dixit, Asstt. Commissioner (A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 4/6/2015 Date of decision: /2015

ORDER NO.

Per : Ramesh Nair

This appeal is directed against Order-in-Appeal No. SB/02/TH-II/09 dtd. 16/6/2009 passed by the Commissioner (Appeals) of Central Excise, Mumbai, wherein Ld. Commissioner (Appeals) upheld the order in original No. 3845/05 date. 31/1/2006 and rejected the appeal of the appellant.

2. The facts of the present case is that, during the audit of the appellants factory some discrepancies in availment of Cenvat Credit was pointed out. The appellant admittedly paid entire amount of Cenvat Credit suo-moto before the issuance of show cause notice. On payment of such duty, the issued as regard the payment of duty attained finality and no show cause notice was issued with regard to short payment of duty. However, show cause notice dated 13/5/2005 was issued proposing only demand and interest on the duty so paid under Section 11AB, penalty under Rule 173Q of Central Excise Act, 1944, read with Rule 25 and under Rule 13 of Cenvat Credit Rules, 2002. Penalty equivalent to amount of duty under Section 11AC. Show cause notice was adjudicated by Order-in-Original dated 30/10/2005 wherein following order was passed:

1. M/s. Precious Plasto Packing Pvt. Ltd are ordered to pay the interest on the duties already paid at appropriate rate under Section 11AB of C. Ex. Act, 1944.

2. I impose penalty equivalent to C. Ex. Duty of Rs.19,38,903/- under Section 11AC of C. Ex. Act, 1944 on M/s. Precious Plasto Packing Pvt. Ltd.

3. I impose a penalty of Rs. 10,000/- under Rule 173Q of C. Ex. rules 1944, read with Rule 25 of C. Ex. rules 2001 & 2002 read with Rule 13 of Cenvat Credit Rules, 2002.

Aggrieved by the said order the appellant filed appeal before the Commissioner (Appeals) who vide impugned order upheld the Order-in-Original and rejected the appeal of the appellant therefore the appellant is before me.

3. Shri. R. Sundaram, Ld. Counsel for the appellant submits that since appellant have paid duty on pointing out by the audit officer, voluntarily, without any protest and before issuance of show cause notice, penalty and interest should not have been demanded. He further submits that in the present case there is independent show cause notice issued for demanding interest under Section 11AB and penalty under Section 11AC and penalty under Rule 73 as regard the duty payment there is no show cause notice therefore same attained finality. He submits that since no show cause notice was issued for demand of duty for the reason the same is admittedly paid by the appellant penalty cannot be demanded.

4. On the other hand, Shri. H.M. Dixit, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.

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

6. It come to the notice regarding the short payment, non payment of duty during the audit of the appellants record as a result appellant suo moto paid the entire duty and not contesting the same. The Revenue has not issued any show cause notice for demand of duty and appropriation of the amount already paid by the appellant.

Provision of penalty imposed under Section 11AC which is reproduced below:

Section 11AC in the Central Excise Act, 1944 1[11AC. Penalty for short-levy or non-levy of duty in certain cases.Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined: 2[Provided that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section be twenty-five per cent. of the duty so determined: Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso: Provided also that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, for the purposes of this section, the duty, as reduced or increased, as the case may be, shall be taken into account: Provided also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent. of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect. Explanation.For the removal of doubts, it is hereby declared that (1) the provisions of this section shall also apply to cases in which the order determining the duty under sub-section (2) of section 11A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President;

(2) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.]

From the plain reading of the above Section, it is provided that penalty under Section 11AC can be imposed on the person who is liable to pay duty which was determined under subsection (2) of Section 11A.

The Section 11A(2) is reproduced below:

SECTION 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.

(1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,

(a) the Central Excise Officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;

(b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of,

(i) his own ascertainment of such duty; or

(ii) duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA.

(2) The person who has paid the duty under clause (b) of sub-section (1), shall inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under clause (a) of that sub-section in respect of the duty so paid or any penalty leviable under the provisions of this Act or the rules made thereunder.

From the above Section 11A(2), it is seen that under this section duty is determined by the Central Excise Officers after considering representation made by the person on whom notice is served under subsection(1). In the present case neither any notice was issued under Section 11A(1) nor Central Excise Officers has determined the duty short paid / not paid under subsection (2) of Section 11A as is evident from the proceedings that no show cause notice under Section 11A(1) was issued nor any adjudication in respect of short payment or non payment of duty has been made, therefore ingredients required under Section 11AC inasmuch as issuance of show cause notice under Section 11A(1) and determination of duty under Section 11A(2) was not carried out by the department, therefore penalty under Section 11AC could not have been imposed. In these facts, I am of the considered view that penalty under Section 11AC was wrongly imposed hence the same is set aside. As regard the penalty under Rule 173Q, I find that since the appellant has not paid duty or availed Cenvat Credit wrongly they have contravened provision of Central Excise Rules, therefore, they are liable to penalty under Rule, 173Q, hence penalty of Rs.10,000/- imposed under Rule 173Q is hereby upheld. As regard the interest, since there is admitted wrong availment of Credit and though the same was paid on pointing out by the audit officer but paid only belatedly, the same attract interest unavoidably. The Honble Supreme Court in the case of Ind-swift [2009(240) ELT 328 (P & H)] clearly held that interest on wrongly availed Modvat credit is payable, from the date of availement of Modvat credit and not from the utilization of wrong availement of credit. Following the ratio of the Honble Supreme Court decision in the case of Ind-swift, I upheld the demand of interest as provided under Seciton 11AB at the relevant time. In view of my above discussion, I sum up order as follows:-

(a) Interest under Section 11AB as confirmed in impugned order is upheld.

(b) The penalty imposed under Rule 173Q for Rs. 10,000/- is upheld.

(c) Penalty under Section 11AC is dropped.

(Order pronounced in court on _____________)

Ramesh Nair Member (Judicial)

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