Whether the penalty is imposable on the assessee where the assessee took credit of amount of refund in their PLA account and intimated the same to department

PJ/Case Laws/2012-13/1129

Case: CANDICO (I) LTD. V/S COMMISSIONER OF CENTRAL EXCISE, NAGPUR

Citation: 2011 (274) S.T.R. 215 (Tri.-Mumbai)

Issue:- Whether the penalty is imposable on the assessee where the assessee took credit of amount of refund in their PLA account and intimated the same to department?

Brief Facts: -
The facts of the case are that the appellant M/s. Candico (I) Ltd., Nagpur are manufacturers of excisable goods falling under Chapter 17 of the Central Excise Tariff Act, 1985. The appellant filed a refund claim of Rs. 2,29,649/- vide application dated 19-9-2006 on the ground that they had paid excess interest on delayed payment of duty during the period from June, 2005 to July, 2006. They had paid interest on delayed payment of duty @ 24% per annum as against the prescribed rate of 13% per annum, thereby paying excess interest of Rs. 2,29,649/-. The said refund claim was rejected by the jurisdictional Deputy Commissioner vide order-in-original No. 04 /NGP-1/2007/Ref, dated 22-1-2007 on the ground that there is no provision in Central Excise Act or Rules thereunder for refund of interest. The appellant preferred an appeal before the Commissioner (Appeals), who vide order-in-appeal No. SVS/169/NGP-I/2007, dated 30-3-2007 set aside the Order-in-original and allowed the appeal of the appellant. This order-in-appeal attained finality as the Revenue did not prefer any appeal against this order. As no refund was granted to the appellant in terms of the aforesaid order, the appellant took suo motu credit of Rs. 2,29,646/- in their PLA account vide entry No. 1, dated 25-4-2007 and utilized the said amount for payment of duty on excisable goods manufactured and cleared by them, during the month of May, 2007. They also informed the department that they have taken credit of Rs. 2,29,649/- in their PLA account vide letter, dated 25-4-2007. The department was of the view that the appellant is not entitled for any suo motu credit and, therefore, a show-cause notice dated 23-4-2008 was issued to the appellant asking them as to why the goods cleared in May 2007 utilising the suo motu credit taken should not be treated as goods removed without payment of duty and Central Excise duty amounting to Rs. 2,29,649/- should not be demanded and recovered under Section 11A(1) of the Central Excise Act, 1944 and interest thereon under Section 11AB of the Central Excise Act. The notice also proposed to impose penalty under Section 11AC of the Central Excise Act read with Rule 25 of Central Excise Rules, 2002. The case was adjudicated vide order-in-original dated 30-9-2008 wherein the Deputy Commissioner confirmed the duty demand of Rs. 2,29,649/- under Section 11A of the Central Excise Act, and also interest thereon under Section 11AB of the Central Excise Act. He also imposed a penalty of Rs. 2,29,649/- on the assessee under Section 11AC read with Rule 25 of the Central Excise Rules, 2002. Aggrieved by the said order, the appellant preferred an appeal before the Commissioner (Appeals), who directed the appellant to make a pre-deposit of the duty amount demanded. On depositing the amount, the appeal was heard and the impugned order was passed wherein the learned lower appellate authority upheld the order-in-original dated 30-9-2008 passed by the original adjudicating authority and also appropriated the amount of Rs. 2,29,649/- paid by the appellant as a pre-deposit on 20-3-2009.

Appellant’s Contention: - The appellant submitted that the ground urged in the appeal memorandum is that the impugned order is bad in law. It is their contention that they have filed refund claim for an amount of Rs. 2,29,649/-, which was rejected by the original adjudicating authority. Subsequently, when their appeal was allowed by the Commissioner (Appeals) vide order dated 30-3-2007, there was no need for filing a fresh application for refund as law does not envisage filing of a fresh application once the refund was sanctioned by the appellate authority. They also relied on the judgment of the Tribunal in the case of Narmada Paints v. CCE, Vadodara reported in 2004 (169) E.L.T. 88 (Tri-Mum). They have also claimed interest on the delayed refund in terms of the provisions of Section 11BB of the Central Excise Act, 1944 and relies on the judgment of the Tribunal in the case of CCE, Ahmedabad v. Olympic Synthetics reported in 2009 (236) E.L.T. 526 (Tri.-Ahmd).

Respondent’s Contention: - The respondent argued that in view of the judgment of the Tribunal in the case of BDH Industries Ltd. v. CCE, Mumbai reported in 2008 (229) E.L.T. 364 (Tri.-LB) all types of refund claimed have to be filed under Section 11B of the Central Excise Act, and no suo motu refund/credit of duty can be taken by the assessee. Accordingly, he submits that the findings of the lower appellate authority is correct in law and has to be sustained.

Reasoning of Judgment: - The Hon’ble Tribunal held that it is a fact that the Larger Bench of this Tribunal in the case of BDH Industries case cited supra have held that there is no provision under the Central Excise Act, 1944 and the Rules allowing suo motu taking of credit or refund without sanction by the proper officer and, therefore, the findings of the appellate authority in the impugned order upholding the recovery of the suo motu refund taken is correct in law and has to be sustained. Interest on such a recovery under Section 11AB is also correct in law. The only issue left for consideration is whether any penalty is imposable on the appellant in the facts and circumstances of the case. It is on record that in the instant case the appellant took suo motu credit of the refund on 25-4- 2007 in terms of the order-in-appeal dated 30-3-2007 and this fact was also intimated by the appellant to the department vide letter dated 25-4-2007. Thus, there was no suppression or willful misstatement of facts on the part of the appellant to evade any duty or claim any ineligible refund. It is a fact that the appellant was eligible for refund in terms of the order-in-appeal dated 30-3-2007, which the department did not grant.
The CBEC has issued instructions to the field formations to the effect that when a refund becomes due in terms of the order of the Com-missioner (Appeals) or other higher appellate authorities such refund should be granted suo motu by the department without waiting for any application from the assessee. In the instant case that has not been done. Therefore, the appellant took suo motu credit, though the same is not permissible under law. There is no mala fide on the part of the appellant and, therefore, imposition of equivalent amount of penalty under Section 11AC read with Rule 25 of tine Central Excise Rules, 2002 is not warranted and, accordingly, they set aside the penalty imposed on the appellant by the lower appellate authority. Thus, the order of the appellate authority is modified to this extent. Further, they direct that the appellant be refunded the amount of Rs. 2,29,649/- in terms of the appellate authority's order dated 30- 3-2007 forthwith (if not already done) without insisting for a separate application for the same and the appellant shall also be eligible for interest thereon for the delayed refund in terms of the provisions of Section 11BB of the Central Excise Act, 1944.

Decision: - Assessee’s appeal allowed

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PJ/Case Laws/2012-13/1129

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