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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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PJ/Case Law/2014-15/2160

Utilisation of credit during the defaulting period under Rule 8(3A).

Case:-  M/s ROHINI CABLES Vs CCE, CHENNAI-II
 
Citation:- 2014-TIOL-372-CESTAT-MAD
 
Brief facts:-The applicant defaulted in payment of excise duty during the period September 2008 to November 2008. Though they filed returns showing duty liability they did not pay the amount which they were required to pay and thus had become defaulters. When they were defaulters as per the provisions of Rule 8(3A) of Central Excise Rules, 2002, they were required to pay excise duty only through cash whereas they contravened this rule and continued to pay duty liability partly through cash and partly through CENVAT credit. They made good the entire default by December 2008.  Revenue issued show-cause notice demanding payment of that portion of the duty paid through CENVAT credit to be paid through cash along with interest and penalty.
 
Appellant’s contentions:-Arguing for the applicant, the learned counsel submits that the applicant's factory is presently closed and payment in cash will cause financial hardship. Further, after payment in cash, refund of the CENVAT credit utilized during the defaulting period will become due to them and such credit refunded will not be of any use to them because their factory is closed. He submits that the Tribunal has held that in such cases only interest has to be paid on CENVAT credit utilized for the previous period. He relies on the following decisions of the Tribunal:
 
(i) Solar Chemferts Pvt. Ltd. Vs. CCE, Thane - I - 2012 (276) ELT 273 = (2011-TIOL-1968-CESTAT-MUM)
 
(ii) Baba Viswakarma Engg. Co. (P) Ltd. Vs. CCE - 2012 (278) E.L.T. 68 (Tri. - Del.) =(2011-TIOL-2010-CESTAT-DEL)
 
Respondent’s contentions:-Opposing the prayer the learned AR for Revenue submits that the rule clearly specifies that when the assessee is default, the duty liability has to be paid in PLA only and therefore the order is legally correct and they should be directed the pre-deposit the entire dues. He relies on the following decisions:-
 
(a) Precision Fasteners Ltd. Vs. CCE - 2011 (268) ELT 163 (Guj.)
 
(b) Paras Lubricants Ltd. Vs. CCE, Raigad - 2012 (286) ELT 82
 
(c) Parekh Bright Bars Pvt. Ltd. Vs. CCE - 2010 (249) ELT 298 = (2009-TIOL-2586- CESTAT-MUM)
 
(d) Composite Technologies P Ltd. Vs. CCE - 2013 (290) ELT 414
 
(e) Compact Tools Vs. CCE - 2013 (290) ELT 412
 
(f) Alphine Pharmaceuticals Vs. CCE - 2013 (291) ELT 425 = (2011-TIOL-1757-CESTATBANG)
 
(g) Akar Ltd. Vs. CCE - 2013 (291) ELT 237
 
(h) Weldon Cello Plast Ltd. Vs. CCE - 2013 (287) ELT 141
 
(i) Pee Dee Polymers Vs. CCE - 2012 (278) ELT 647
 
Reasoning of judgment:- It was found that there are conflicting decisions on this issue. During the defaulting period there is no bar on taking credit. There is bar only on utilization of credit. Whenever a demand is confirmed against an assessee, the assessee can pay the duty liability through cash or CENVAT credit so long as there is no specific prohibition against such payment through CENVAT credit. Such prohibition exists as per Rule 8(3A) only when the assessee is in default. Once they come out of the default by paying the defaulted amounts in cash, they can pay the duty liability using CENVAT credit. The fact that they had used it prior to coming out of default can result in payment of interest on such amount and no demand on such amount again. This is the view expressed in one set of decisions. The other set of decisions on this issue is that since the rule prescribes that the amount has to be paid in PLA it has to be paid in PLA. This matter can be decided at the time of final hearing of the appeal. The decision of the Gujarat High Court in the case of Precision Fashioners is whether defaulted amounts could be paid through credit accumulated after default. At any rate, it is obvious that there will be some interest liability on the applicant since the duty paid through Cenvat credit during defaulting period cannot be taken as proper discharge of duty. This interest amount is not seen quantified. Further a penalty also is payable. Considering this aspect, the applicant is directed to pre-deposit Rs.50,000/- (Rupees fifty thousand only) within four weeks for admission of the appeal and to report compliance on 20.9.2013. Upon such deposit, pre-deposit of the balance dues stands waived and its collection stayed during the pendency of the appeal.
 
Decision:-  Pre-deposit ordered.
 
Comment:- The analogy of the case is that as there are conflicting decisions regarding the utilisation of credit during the defaulting period, the pre-deposit was ordered of the credit wrongly utilised by the assessee to be paid in cash even when the credit wrongly utilised is available as re-credit. There are one set of decisions that take a liberal view while another set of decisions take a strict view and states strict implementation of the Rule 8 (3A) of the Central Excise Rules. On account of the controversy, the assessee is being the victim.  

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