Whether benefit of 25% of the amount of penalty can be extended by appellate authorities?

PJ/Case Laws/2012-13/1547

Case:- M/s General Motors India Pvt. Ltd. Vs Commissioner of C.Ex., Vadodara-II

Citation:- 2013-TIOL-502-CESTAT-AHM

Brief Facts:- The appellant is engaged in the manufacture and assembly of motor vehicles, import and procure indigenously various types of raw materials/parts/components. They have been availing cenvat credit of the excise duty element of such raw material/parts/components used as inputs. Intelligence was received that whenever the raw materials/parts/components were damaged in transit, the appellants claimed insurance of that damaged portion with the insurance company. The insurance claims were inclusive of the excise duty for which the appellants had already availed the cenvat credit. Thus they were availing the benefit of duty credit on the one hand and on the other hand claiming the amount of excise duty element with the insurance company. Summons were issued to the company for producing the details in this regard and statements of the Divisional Manager (Excise) recorded. The appellants admitted that they had availed cenvat credit on the indigenous and imported transit damaged materials and had reversed the duty involved on the said transit damaged materials for which they had received insurance claim for the period from September 2000 to March 2004 and that they had also reversed the duty and education cess pertaining to the transit damaged material for the month of August 2005. With regard to the reversal of credit in respect of the transit damaged materials for the later period i.e. from April 2004 to July 2005, the appellants submitted that they had already reversed the duty amount every month for the insurance claims received by them during the said period and gave the month wise details to the Department for the period April 2004 to July 2005. The appellants submitted that while they were regularly reversing such duty involved every month since April 2004, they had not reversed for the past period prior to April 2004 due to oversight. A show cause notice was issued to the appellants for recovery of cenvat credit and education cess for the period from September 2000 to March 2004 and August 2005, under rule 14 of the Cenvat Credit Rules, 2004 read with section 11A of the Central Excise Act, 1944, and interest thereon under rule 14 of the Cenvat Credit Rules, 2004 read with section 11AB of the Central Excise Act, 1944, imposition of penalties under rule 15 of the Cenvat Credit Rules read with section 9 and section 11AC of the Central Excise Act, 1944 for wrong availment of cenvat credit with intent to evade payment of central excise duty.

Show cause notices were issued also for imposition of penalties on the individuals. The appellant contested the issue before the adjudicating authority and adjudicating authority confirmed the demands raised by an order and imposed equivalent amount of penalty and also recovery of interest and personal penalty on the Divisional Manager of the appellant's company. Aggrieved by such an order, appellant preferred an appeal before the first appellate authority. The first appellate authority in the impugned order has set aside the penalty on the individual but confirmed the demand of the duty, interest thereof and also the equivalent amount of penalty. Thereafter, appellant filed appeal before Tribunal.

Appellant’s contention:- The appellant submits that the he is not contesting the amount reversed by them as cenvat credit taken on the parts which were unusable in their factory premises. It is his submission that they are seeking only the benefit of Section 11AC, the discharge of 25% of the amount confirmed as duty liability and also ready to pay the amount within thirty days of the issuance of this order.

Respondent’s Contention:- The Respondent reiterates the findings of the lower authorities.

Reasoning of judgment:- The Tribunal heard both the parties carefully and considered the submissions made by both sides. The Tribunal finds that as there is no dispute towards the reversal of the cenvat credit on the parts which were not utilised by the appellant in their factory premises, order of the lower authorities as regards confirmation of the demand is upheld.

As regards the interest, Tribunal find that the appellant needs to pay interest as the provisions of Section 11AB will apply in this case even if cenvat credit is reversed before the issuance of show cause notice. Accordingly, we hold that the appellant is also liable to pay interest on the amount of duty liability which has been confirmed. Adjudicating authority will quantify and convey the amount of interest payable by the appellant as early as possible and on such communication, appellant will pay the interest within thirty days and report compliance to the adjudicating authority. As regards the penalty, we find merits in the submissions made by the appellant that since they have paid the amount of duty liability before the issuance of show cause notice, they are eligible to get the benefit of the decision of the Hon'ble High Court of Gujarat in the case of Akash Prints Pvt. Ltd. - 2009 (239) ELT 439 = 2009-TIOL-125-HC-A HM-CXwherein Hon'ble High Court of Gujarat has held that if the lower authorities have not extended the benefit of discharge of 25% of the amount of the duty liability as penalty as provided under Section 11AC of the Central Excise Act, 1944, Tribunal is at liberty to extend these benefits to assessee-appellant. From the records we find both the lower authorities have not extended this benefit to the appellant. Accordingly, respectfully following the ratio of the Hon'ble High Court of Gujarat, we extend the benefit of payment of 25% of the amount of the duty liability as penalty within thirty days from the date of receipt of this order and report compliance to the lower authorities who will consider it as compliance of our order. The appeal is disposed of as indicated hereinabove.

Decision:- The appeal is allowed.

Comment:- It is clear from this case that the benefit of payment of 25% of the amount of the duty liability as penalty under Section 11AC of the Central Excise Act, 1944, can also be extended by the appellate authorities if the same has not been provided by the lower adjudicating authorities.

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PJ/Case Laws/2012-13/1547

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