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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-2013/14-1596

Whether penalty is imposed under Rule 15(2) of Cenvat Credit Rules, 2004?

Case:-BALRAMPUR CHINI MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD

Citation:- 2013(30) S.T.R. 384 (Tri.-Del.)

Brief Facts:- Shri Bipin Garg, learned Counsel submits that there is already reversal of Cenvat credit of  Rs. 7,37,624/-which is apparent from page 11 of adjudication order. Considering such aspect stay application is disposed waiving requirement of pre-deposit of balance amount. Learned Counsel prays for disposal of appeal itself. There is no objection from Revenue for such disposal.

Appellant Contentions:- The Appellant contendsonly penalty of Rs. 7,73,504/- imposed under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. He submits that at the relevant point of time Rule 15(2) of Cenvat Credit Rules,2004 did not take care of input service credit, whereas sub-rule (3) of Rule 15 deals with input service. That rule does not speak of any rigorous penalty. Therefore, let there be an order to reduce the dispute directing the appellant to reverse balance amount of Cenvat Credit against the demand of Rs. 7,73,504/- as against which reversal to the extent of Rs. 7,37,624/- was made as per adjudication order and reasonable penalty may be imposed so that litigation shall come to an end.

Respondent Contentions:-The Revenue supports the order of the lower authorities.

Reasoning of Judgment:-We have considered the submission from both the parties and perused the record, We find that the appellant intends to end the litigation with the department. It has already reversed the Cenvat credit to the extent indicated in adjudication order with deposit of interest of Rs. 49,401/- as is apparent from the said order. The crucial issue is only penalty that has been imposed under Rule 15(2) of Cenvat Credit Rules, 2004. Learned Adjudicating Authority invoked Section 11AC for imposition of penalty under Rule 15(2). When this sub-rule is read, that does not bring a case of service tax issue since the input and capital goods are coverage of that sub-section. When sub-section (3) has enacted, mechanism to deal with input services which was subject matter at page 8 of the adjudication order, there is no reference to Section 11AC in that sub-section. In absence of legislative intent to invoke Section 11AC for reading sub-section (3) the adjudication order is not sustainable insofar as penalty imposed under Rule 15(2) is concerned. Appropriate sub-section is sub-section (3). It is pertinent to mention that while sub-section (2) deal with element of Section 11AC, sub-section (4) mentions about element of Section 78 of the Finance Act, 1994 for no mechanism provided in sub-rule (3) to invoke Section 11AC of Central Excise Act, 1944, nor Section 78 of the Finance Act, 1994, levy of penalty of Rs. 10,000/- shall be justified in the fitness and circumstances of the case.

Decision:- The appellant gets partial relief confirming duty and interest demand but reducing the penalty to Rs. 10,000/-.

Comment:-The crux of the case is that when the appellant has wrongly taken cenvat credit of service tax, then Rule 15(3) is applicable instead of Section 15(2), as Rule 15(2) covers only the issues related to inputs and capital goods. Further, there is no mechanism to impose penalty under section 11AC or section 78 in Rule 15(3). Therefore, as the penal provisions for section 78 are to be read with Rule 15(4) and that rule has not been invoked, reduced penalty has been imposed.

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