At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Bangalore
By, THE HONORABLE JUSTICE: S.S. GARG
By, MEMBER AND THE HONORABLE JUSTICE: ASHOK K. ARYA
For Petitioner: Raghavendra, Advocate And For Respondents: Pakshirajan, Asst. Commissioner, AR
1. The present appeal is directed against the impugned order dt. 18/12/2007 passed by the Commissioner(Appeals) whereby the Commissioner(Appeals) has rejected the appeal of the appellant and upheld the Order-in-Original.
1.1. Briefly the facts of the present case are that the officers of the Anti Evasion Unit, Pune I commissionerate visited the unit and found that the assessee was availing inadmissible credit on inputs and capital goods. It was observed that the assessee had been receiving certain capital goods from M/s. Bajaj Auto Limited, Pune on loan basis and the said goods were being utilised for t
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he manufacture of their final products. The values of the goods received free of cost was not being considered for amortization in the value of the final product. Further discrepancies listed below were also noticed.
i. Availment of 100% CENVAT credit against 50% on the capital goods.
ii. Availment of CENVAT credit in excess of invoice amount.
iii. Availment of credit on rejected goods on which no rework was done.
iv. Credit taken on full quantity on inputs received even though there was short receipt.
1.2. On the above mentioned lapses being pointed out, the assessee paid the amounts along with interest and requested for closure of the issues under Section 11A(2B) and no show-cause notice be issued. However a show-cause notice was issued to them demanding appropriation of the amounts paid and also a demand for penalty under Rule 25 and Rule 15 of CENVAT Credit Rules read with Section 11AC of the Central Excise Act. The original adjudicating authority confirmed the demands and appropriated the amounts with respect to duty and interest already paid by the assessee. Further a penalty of Rs. 7,76,724/- under Section 11AC was imposed. Aggrieved by the Order-in-Original imposing the penalty, the appellant filed appeal before the Commissioner(Appeals) but the Commissioner(Appeals) has rejected the appeal. Hence the present appeal.
2. Heard both the parties and perused records.
3.1. The learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed by ignoring the statutory provision as well as binding judicial precedent on the same issue. He further submitted that even though the appellant had availed 100% credit on capital goods (instead of availing 50% in the first financial year and remaining 50% in the next financial year) due to oversight but the said credit was not utilised and reversed immediately after the same was being pointed out by the Department and therefore the question of imposing a penalty does not arise in view of Section 11A(2B) of the Central Excise Act, 1944. In support of this submission, he relied upon the following decisions:
i. Vilax Industrial Fabrics Vs. CCE, LTU, Bangalore [Final Order No. 20645/2016 dt. 19/08/2016]
ii. Kotsons Pvt. Ltd. Vs. CCE&ST, Jaipur-I [2016(333) ELT 456 (Tri. Del.)]
3.2. He further submitted that even though the appellant has received some old unused machineries/ capital goods from M/s. Bajaj Auto Ltd. on loan licence basis, the said goods have not been installed due to the condition of the machineries which is beyond repair and therefore the question of inclusion of the amortised value of the same in the assessable value of the goods cannot be sustained and consequently the imposition of penalty is also liable to be set aside. He further submitted that the issue of non-amortisation of cost of the capital goods received free of cost in the assessable value of the finished goods was unsettled due to conflicting views/ decisions during the relevant period and hence no penalty is imposable on the appellant. For this submission, he relied upon the following decisions:-
i. Birla Corporation Vs. CCE, Kolkata-III [2014(307) ELT 924 (Tri. Kol.)]
ii. Commissioner Vs. Anil Polymers Pvt. Ltd. [2009(237) ELT 358 (Tri.)]
3.3. He also submitted that the goods have been returned back after rework and the appellant has reversed the credit along with interest from the date of availment till the date of reversal of the credit availed in terms of Rule 16. Further the appellant being a LTU, availment of small portion of excess/ wrong credit cannot be considered as availed with intention to evade duty and no penalty is imposable especially when the said amount is reflected in all the statutory records maintained by the appellant. In support of this submission, he relied upon the following decisions:-
i. Hikal Ltd. Vs. CCE&ST, Surat [2015(329) ELT 901 (Tri. Ahmd.)]
ii. Tata Motors Ltd. Vs. CCE,C&ST, Bangalore-I [2014 (311) ELT 353 (Tri. Bang.)]
iii. Kumar Organics Products Ltd. Vs. CCE, Bangalore [2014(307) ELT 774 (Tri. Bang.)]
4. On the other hand learned AR reiterated the findings of impugned order. After considering the submissions of both the parties and perusal of the materials on records and the various decisions relied upon by the appellant cited supra, we find that the appellant has by oversight availed 100% of the credit on capital goods wherein the appellant was required to take only 50% in the first financial order and the remaining in the next financial year; but as soon as the Department pointed out this lapse, the duty was reversed along with interest. In that kind of a situation, as per Section 11A(2B) of the Central Excise Act, the show-cause notice should not have been issued. Further we also find that the demand of duty on non-amortisation cost of freely supplied material in the assessable value of the final product amounting to Rs. 17,291/- was paid along with interest of Rs. 3,113/- on 22/01/2007. We also find that the credit availed on the finished goods returned under Rule 16 of the Central Excise Rules, 2002 has been converted into scrap and Rs. 12,217/- was paid along with interest of Rs. 2,892/- on 22/01/2007. In view of these facts and circumstances, we are of the considered view that the impugned order is not sustainable in law and therefore we set aside the same by allowing the appeal of the appellant with consequential relief, if any