Whether Penalty under Rule 25 of CER, 2002 imposable on suo motu taking of credit by assessee?

PJ/Case Laws/2012-13/1076

Case: M/s JOCIL LTD Vs COMMISSIONER OF CUSTOMS & CENTRAL EXCISE, GUNTUR

Citation: 2009-TIOL-1169-CESTAT-BANG

Issue:- Cenvat credit taken suo motu by assessee - whether penalty under Rule 25 is justified?

Brief Facts:- Appellants are manufacturers of toilet soap, soap for other than toilet purpose, stearic add and other excisable goods. They availed Cenvat credit on various inputs and Capital goods under the provisions of CENVAT Credit Rules, 2002.

During scrutiny, it was found that for the month of March 2004, they had taken credit of Rs.49, 798/- in PLA, being an excess payment of duty, after finalizing the ER-1 Monthly Returns for the months of November and December, 2003.

The department proceeded against them on the ground that in terms of Section 11B, any person claiming refund of duty of excise must make an application for refund of such duty to the jurisdictional Assistant Commissioner.

Therefore, the Lower Authority disallowed the credit taken and confirmed the demand of duty of Rs.49, 798/- under Section 11A (1) along with interest under Section 11AB of the Central Excise Act, 1944. Penalty of Rs.10,000/- was imposed under Rule 25 of the Central Excise Rules, 2002.

In appeal, the Commissioner (Appeals) examined the issue and held that he did not find any reason to interfere in the order imposing penalty under Rule 25 of the Central Excise Rules, 2002 for violation of the Central Excise Rules. Thus, he upheld the imposition of penalty.

Appellants are aggrieved over the impugned order and have come before this Tribunal.

Reasoning of Judgment:- It was noted that the appellants paid excess duty and took credit of the same in the monthly ER-1 Returns and PLA. The appellants have pleaded that on the bonafide belief, they took the credit. They also cited the decision of the Tribunal in Tide Water Oil Company Vs. CCE, Chennai - 2002 (52) RLT 463 (CEGAT-Chennai) holding that good. They were of the considered opinion that for duty paid in excess by way of debt in RG23A, the assessee can take credit of Modvat with simple intimation to the Superintendent of Central Excise. The department holds the view that where excess duty is paid, the proper course would be to file refund claim under Section 11B and the assessee should not take suo moto credit.

It was noted that the appellant fairly agreed that the issue is covered against them the decision of the Larger Bench in the case of BDH Industries Ltd. Vs. CCE (Appeals), Mumbai-I - 2008 (229) ELT 364 (Tn. -LB) = 2008-TIOL-1211-CESTAT-MUM-LB wherein it has been held that all types of refund have to be filed under Section 11B and no suo moto refund can be taken unless and until the Department is satisfied that the incidence of duty has not been passed on. In any case, the amount had been reversed once the irregularity was pointed out.

It is seen that the Assistant Commissioner, in his Order-in-Original, held that penalty under Section 11AC is not imposable on the appellants, as there were no suppression of facts, wilfull mis-statement, etc. Further, Rule 25 provides for confiscation and penalty when a producer, manufacturer, registered person of a warehouse or registered dealer (a) removes any excisable goods in contravention of the provisions, or (b) does not account for any excisable goods produced or manufactured or stored, or (c) engages in the manufacture, production or storage of any excisable goods without registration, or (d) contravenes any of the provisions of the rules with an intention to evade payment of duty. In the instant case, none of the above offences was alleged and proved against the appellants. In fact, the appellants sought for objections before taking suo moto credit of excess paid duty amounts.

Moreover, the appellants have produced a large number of case-laws in their support. All these indicate that there were different views on the issue and that is why the matter was referred to the Larger Bench.

In such case, the Tribunal cannot allege any malafide and the contention of the appellant that they were under bonafide belief that suo moto credit can be taken should be considered favourably. In these circumstances, penalty under Rule 25 is not warranted.

Decision:- Penalty is set aside.

Comment:- Penalty cannot be imposed when there is bonafide belief on the part of assessee. This bonafide belief should be based on certain Tribunal or Court decision. Merely, by thinking the provision in own way does not mean that it is bonafide belief.

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PJ/Case Laws/2012-13/1076

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