Pradeep Jain - Chartered Accountant

Case: - Rishab Vel Veleen Limited v. CCE, MEERUT-I

Citation: - 2009 (92) RLT 984 (CESTAT-Del.)

Issue:- Whether interest is payable in case of delay in paying refund in cash of unutilised Cenvat credit balance lying in RG 23 A Part-II?

Brief Facts: -

Appellants became eligible to avail exemption due to their expansion exceeding the prescribed limit. The Cenvat credit could not be utilised by them as the final products became exempted. The Department gave the refund in the form of Cenvat credit after 3 months. Appellants initiated litigation against the said refund in Cenvat credit. Thereafter, the appellants filed refund claim in pursuance of the order passed by Commissioner (Appeals).

Appellant’s Contention: -

They are eligible for interest from the dates of filing refund which was to be considered the date when the appellants had first filed for refund.

Respondent’s Contention:-

The Department contended that the date on which refund claim were submitted is to be the date of filing refund claim after favourable orders of the Commissioner (Appeals). It was contended that the refund has been paid within 3 months from the said date of filing of refund claim. No interest is payable on the amounts lying in the Cenvat account of the appellant even when cash refund was permissible.

Reasoning of Judgment: -

Tribunal held that the Cenvat credit lying unutilised in the appellant’s account cannot be treated as saving bank account or fixed deposit account in a bank. Till the debit is made in the Cenvat account, it is not a case of duty payment by the appellant. Only in cases of refund of duty paid, the question of interest will arise.

Even during the period where the assessees were required to maintain a PLA in which cash credited by them is taken as credit, the said amounts were not earning any interest. Under these circumstances, the question of granting any interest on refund in cash of unutilised Cenvat credit does not arise.

Decision: - No infirmity in the order of the Commissioner (Appeals). Appeals rejected.

Case: - CCE, Surat-I v/s Nayna Sarees

Citation: - 2009 (92) RLT 961 (CESTAT-Ahmd.)

Issue: - Whether the deposit under Section 11D can be made from from unutilized Cenvat credit balance?

Brief Facts: -

Respondents were engaged in manufacture of grey manmade fabrics and were availing Cenvat credit and paying duty on grey fabrics upto 08.07.04. They opted for exemption w.e.f. 09.07.04. The condition for availing exemption was that the respondents will not avail Cenvat credit. However, they continued to collect excise duty from buyers till 31.07.04 but no duty was paid to the department nor the related invoices included in return of July 2004.

Respondents explained that the lapse was due to failure to correct the software and that excise invoices were raised inadvertently without mala fide intent. They stated that they had reversed a huge amount of Cenvat credit on stock of yarn and more than Rs. 5 Lakhs was debited as unused credit. Also, an amount of Rs. 2,012/- on certain invoices issued to an exporter so that they could avail rebate. Unutilised Cenvat credit was available with respondent on 09.07.04 which was reversed by them.

Proceedings were initiated against the respondent and demand of duty in terms of Section 11D of the Central Excise Act, 1944 was confirmed with interest and penalty was also imposed under Rule 27.

In appeal, the Commissioner (Appeals) held that the fact that unutilised surplus credit of Rs. 5 lakhs mistakenly surrendered by the respondents proves that respondents had no malafide in issue of excisable invoices after 09.07.04 for any such payment which could have been made through the surplus credit. It was held that it was case of negligence. He held that the findings of adjudicating authority about mala fide intentions of respondents to deliberately and consciously collect excise duty to garner undue advantage and to harm revenue interest are not justified. The Commissioner (Appeals) maintained the penalty on account of negligence and contraventions and adjusted the said surplus Cenvat credit available with the respondents on 09.07.04 against the duty demand raised under Section 11D. Appeal was partly allowed.

Department has filed appeal against the decision of the Commissioner (Appeals).

Reasoning of Judgment: -

The Tribunal held that respondents were having Cenvat credit on the day they opted for exemption. They would have paid the duty collected by them but not debited, from Cenvat credit for payment of duty in respect of clearances if they had not opted for exemption. Therefore, the Commissioner (Appeals) had rightly observed that justice requires being set-off of demand being confirmed against the respondents, against the credit so available with them during the relevant period.

Decision: - No infirmity in the order of the Commissioner (Appeals). Appeal rejected.

Case: - Dr. Writer’s Food Products Pvt Ltd v/s CCE, Pune-II

Citation: - 2009 (92) RLT 965 (CESTAT-Mum.)

Issue: - Whether reversal of Cenvat credit taken on common input which is used in manufacture of both dutiable and exempted goods absolves the assessee from the liability to pay 10% of the total price of the exempted product in terms of Rule 6 (3) (b) of the Cenvat Credit Rules, 2004?

Brief Facts: -

Appellants used cocoa beans (input) in manufacturing their dutiable and exempted finished goods and took Cenvat credit on the same. After clearance of the finished goods they reversed the Cenvat credit taken on the common input (cocoa beans). The Department issued show cause notice by contending that the action of appellants in reversing Cenvat credit after clearance of exempted goods was not acceptable. They were required to pay 10% of the total price of the exempted product in terms of Rule 6 (3) (b) of the Cenvat Credit Rules, 2004. Accordingly demand was confirmed with interest and penalty was also imposed. Commissioner (Appeals) confirmed the order of the adjudicating authority. The appellants have filed this appeal against the said order.

Appellant’s Contention: -

Since they have reversed the ineligible credit, they were not required to pay the amount under Rule 6 (3) (b).

Respondent’s Contention: -

Respondents have relied upon the judgment in case of M/s Nicholas Piramel (I) Ltd. v/s CCE, Thane-1 [2008 (89) RLT 566 (CESTAT-LB) in which it was held that provisions of Rule 6 (3) (b) will not be applicable if Cenvat credit taken on common inputs is reversed prior to the removal of exempted final products from the factory.

They have also relied upon Para 8 of the judgment in case of CCE, Bombay-I vs. Bombay Dyeing and Mfg. C. Ltd. [2007 (82) RLT 117 (SC) and have contended that when the credit is reversed before utilization and before clearance of the exempted goods, only then it will amount to not taking credit. Therefore, they have prayed for remand of matter to the Commissioner to verify this aspect.

Reasoning of Judgment: -

The Tribunal has relied upon the judgment of Allahabad High Court in case of Hello Minerals Water (P) Ltd. v/s Union of India [2004 (174) ELT 422 (All)] in which it was held that reversal of credit can be made even subsequent to the clearance of the final products and it will amount to non-taking of credit and the benefit of exemption notification is available to the assessee in that case.

Further, the Tribunal has also relied upon the judgment of the Gujarat High Court in the case of CCE, Ahmedabad II v/s Maize Products [2008 (89) RLT 211 (Guj.) in which it was held the reversal of the credit at the Tribunal stage i.e. much after the clearances of the exempted goods from the factory, was held to be in order.

The Tribunal noted that there is no specific finding by the Hon’ble Supreme Court that if the credit is reversed after utilization and after the clearance of exempted goods, it would still amount to taking the credit and exemption will not be available.

Tribunal considered the fact that the appellant had reversed the credit taken as well as paid interest and felt that the appellants have undone the act of taking/ utilizing the credit and in the light of judgment of High Courts of Allahabad and Gujarat, it amounts to not taking credit and therefore, they are not required to pay an amount equal to 10%.

Accordingly Tribunal has rejected the miscellaneous application of appellants to include additional grounds as the matter has been decided and also because these grounds were new grounds and were not raised before the lower adjudicating authorities.

Decision: - Order of the Commissioner (Appeals) set aside. Appeal allowed.

Case: - CCE, Ahemdabad v/s Lubi Electronics

Citation:- 2009 (92) RLT 1027 (CESTAT-Ahmed.)

Issue: - Cenvat Credit taken not immediately but taken after delay of one year, whether can be taken?

Brief Facts: -

The respondent-assessee had availed Cenvat credit of duty on various services received by them in connection with their manufacturing activity after more than one year.

Appellant’s Contention: -

The respondent should have taken the credit within reasonable time. As per Rule 4 (1) of Cenvat Credit Rules, 2004 the Cenvat credit is to be taken immediately on receipt of inputs. Reliance has been placed on decision given in the case of M/s J.V. Strips Ltd. v/s CCE, Rohtak [2007 (82) RLT 698 (CESTAT-Del.)].

Respondent’s Contention: -

The said Rule is not applicable to the input services. It is contended that in any case the rule provides that credit may be taken immediately but it does not really disallow credit to be taken subsequently. They have submitted that in the CBEC’s Excise Manual of supplementary instructions in para 3.5 of Chapter 5, it has been clarified that “Cenvat Credit may be taken immediately on receipt of inputs in the factory. This, however, does not mean, nor it is even envisaged that if the manufacturer does not take credit as soon as the inputs are received in the factory, he would be denied the benefit thereof.”

Reasoning of Judgment:-

Tribunal held that there is no provision for denying credit because of delay nor there is any time limit for taking credit in the Cenvat Credit Rules and therefore, the stand taken by the Revenue that credit has to be taken within a reasonable period has no basis. The Tribunal further held that the respondents have rightly relied upon supplementary instructions of Board which also do not prescribe any time for the purpose.

Decision: - Appeals rejected. Cross Objections also disposed of.

Case: - Aparna Paper Processing Industry (P) Ltd v/s CCE (ST), Pondicherry and vice-versa

Citation: - 2009 (92) RLT 1036 (CESTAT-Che.)

Issue: - Classification is to be decided on the basis of activity done by assessee and not on the basis of nomenclature. Contention of assessee, not rebutted by the Department, is acceptable.

Brief Facts: -

Appellants-assessee had accounted receipt of “Management Fee” from one of the concern belonging to same group in the years 2001-02 to 2002-03. The Department initiated proceedings against appellant. The Original adjudicating authority gave finding that the appellants had rendered taxable services falling under the category of ‘Management Consultant’ during the material period without following statutory formalities including payment of service tax due. Demand of Service tax with interest as well as penalty is imposed under Section 76, 77 and 78 of the Finance Act, 1994 on the appellants. The demand of service tax and penalty was confirmed by the Commissioner (Appeals) however penalty imposed under Section 76 was vacated finding that the appellants were in confusion as to their liability to pay tax and therefore, they deserved relief under Section 80. The penalty imposed under Section 78 was sustained by observing that the same has not been challenged by the appellants. The appellants have filed this appeal challenging the demand of tax and interest as well as the penalties imposed. Department has also filed appeal against an observation of the Commissioner (Appeals) in the impugned order.

Appellant’s Contention: -

It was contended that appellants had incurred certain expenditure common with the said concern of their group and had accounted the same in their records as “Management Fee”. The said amount did not represent consideration for ‘Management Consultancy’ rendered to the group concern.

It was further contended that orders of the original authority or the order of the Commissioner (Appeals) did not substantiate the finding that the appellants had rendered taxable service classifiable under the category ‘Management Consultant’ or that the amount accounted as ‘Management Fee’ in their accounts represented taxable value realised for ‘Management Consultancy’ by the appellants. It was also contended that the impugned order had wrongly held that the appellants had not challenged the penalty imposed under Section 78.

It is further submitted that the activity involved could be classified under the category ‘Business Auxiliary Services’ (BAS) which was made taxable service on 01.07.03, i.e. subsequent to the material period.

Respondent’s Contention: -

Revenue has filed the appeal against the observation of the Commissioner (Appeals) in the impugned order that “they (appellants) also paid 25% of penalty imposed under Section 78 as per impugned Order-in-Original and Revenue has not contested the same, therefore the same is not the subject matter of this case”.

Reasoning of Judgment: -

The Tribunal found that the findings of authorities below that the appellant-assessee had rendered management consultancy during the material period and had incurred liability to pay service tax under that category is not substantiated. There is no finding as to the nature of the service rendered and if the same was taxable under ‘Management Consultancy’.

The Tribunal held that the submission of the appellant that the services rendered by them would fall under BAS which was introduced on 01.07.03, has not been convincingly contested.

The Tribunal had found that the finding of lower authorities that appellant had rendered taxable service is without any reliable evidence to substantiate the same. In such circumstances, the impugned demand of tax, interest and the penalties imposed on appellant are held to be not sustainable.

Decision: - Appeal filed by appellant-assessee allowed. Appeal filed by the Department is dismissed as it concerns the penal liability of appellant-assessee for rendering management consultancy during the material period.

Case: - Metal Recycling Industry & Ors. v/s CCE, Surat-I

Citation: - 2009 (92) RLT 988 (CETAT-Ahmd.)

Issue: - Truck owner is liable for mis-declaration in invoice. Penalty on partner and partnership firm can be imposed separately. Penalty and fine can be imposed on undervaluation of goods.

Brief Facts: -

A truck carrying declared mixed brass scrap of 9860 Kgs was intercepted by the Officers on 16.01.04. In the documents, it was found that the goods were declared in the invoice as 192 bags of mixed brass scrap but on verification, it was found that the goods were brass scrap, zinc scrap and lead scrap of varying quantity. The value declared by the appellant in the invoice was Rs. 2/- per Kg whereas the value of different types of scrap was found much higher. The partner of the appellant accepted that the value of brass scrap was Rs. 60/- per Kg, zinc scrap Rs. 40/- per KG and lead scrap Rs. 15/- per Kg. He also offered to deposit the duty short paid by them and was later on deposited.

Department initiated proceedings against the appellants for short payment of duty. The original adjudicating authority confirmed the demand of duty and orders confiscation of the goods with option to redeem the same by paying redemption fine. Penalty was imposed on the appellant as well as on the partner. The Truck in question was also confiscated with an option to redeem the same by paying redemption fine.

Appeal to the Commissioner (Appeals) was rejected. Thereafter, appellant has filed this appeal.

Appellant’s Contention: -

Appellants have contended that the value of zinc scrap should have been taken to be Rs. 25.92/- per Kg whereas the department have adopted the value of Rs. 40/- per Kg. It was further contended that it was a bona fide mistake on the part of person preparing the invoice and redemption fine fixed for goods was on the higher side. It was contended that the penalty imposed upon the firm as well as on the partner should be set aside. Further, the truck can not be confiscated as there was no knowledge of truck driver of undervaluation of goods.

Reasoning of Judgment: -

The Tribunal has found that the appellants have not disputed that the goods were mis-declared in quality as also in valuation and as such the duty confirmation has not been disputed by the appellants.

For the value of zinc scrap, the Tribunal held that the value was adopted from the bill of entries showing the value of zinc scrap and it was also based on the statement of the partner of Appellant given at the time of seizure itself. There is no infirmity in the impugned orders. Duty demand has been confirmed.

For redemption fine on goods and for penalty imposed on the firm, The Tribunal held that there is no evidence on record to show a bona fide mistake made by the appellants in preparing the invoice. The value adopted by the assessee was on much lower side and reflects upon the appellant’s mala fide. Therefore, no interference is required with the quantum of redemption fine or penalty.

For penalty imposed on the partner of the appellant, the Tribunal has found that as penalty has been imposed on the partnership firm (appellant herein), a separate penalty on the partner may not be justified. Therefore, penalty on partner is set aside.

For confiscation of the Truck, the Tribunal has held that the goods loaded in the truck were duly accompanied by an invoice. The Truck owner or the driver of the truck could not be expected to verify the correctness of the description or value given in the invoice by appellant. Since there is no evidence that they had any knowledge about undervaluation of goods or mis-declaration of the same. Therefore, there are no justified reasons for confiscation of said truck. The same is set aside.

Decision: - Appeals disposed off in the said manner.

Case: - Ravi Cables Industries v/s CCE, Delhi

Citation: - 2009 (92) RLT 977 (CESTAT-Del.)

Issue: - Reduction of penalty under Section 11AC when duty for goods found short was paid in the same month in which shortage was found.

Brief Facts: -

Appellant’s factory was visited by Excise Officers on 08.11.04 and during verification of stock of finished goods, finished goods of value of Rs. 18, 88, 151/- and involving duty of Rs. 3, 08, 147/- was found short vis-à-vis the balance recorded in RG-1 register. Part of duty involved was debited in RG 23 A Part-II on the same day and the rest of the duty involved was paid on 29.11.04. The Partner in his statement on 08.11.04 and on 09.05.05 has stated that he was unable to explain the shortage as he was busy with personal matters. In enquiry held on 08.08.05, he admitted that the goods were removed without payment of duty. On this basis, proceedings were initiated against appellant. Duty was confirmed and penalty under Section 11AC and penalty on partner under Rule 26 was imposed. In appeal before Commissioner (Appeals), the demand of duty and penalty under Section 11AC was confirmed but penalty on partner was set aside. Appellants have filed this appeal challenging the imposition of penalty on appellant-company under Section 11AC.

Appellant’s Contention: -

It is contended that since the entire duty on the goods found short has been paid in the same month i.e November 2004 and long before the issue of show cause notice dated 30.09.05 and in view of proviso to Section 11AC, the penalty would be only 25% of the duty and not equal to the duty. Reliance has been placed on judgment of Delhi High Court in case of K.P.Pouches (P) Ltd. v/s UOI & Anr [2008 (85) RLT 483 (Del.) and in the case of CCE v/s Malbro Appliances P. Ltd [2007 (79) RLT 109 (Del.)].

Respondent’s Contention: -

Respondent reiterated the findings of the Commissioner (Appeals).

Reasoning of Judgment: -

The Tribunal held that since the duty whose demand was confirmed by the Assistant Commissioner was in respect of the shortage of finished goods and the same was paid by the appellant in full prior to issue of show cause notice, the appellant are covered by the provisions of proviso to Section 11AC and therefore the penalty would be only for 25% of the duty amount. The Tribunal has followed the judgement given in the case of K.P.Pouches (P) Ltd. v/s UOI & Anr. Penalty under Section 11AC is reduced to 25% of the duty demand. Impugned order modified accordingly.

Decision: - Appeal disposed off accordingly.

Case: - Krunal Catering Service v/s CCE, Vadodara

Citation: - 2009 (93) RLT 107 (CESTAT-Ahmd.)

Issue: - Whether penalty is imposable, when service provider was under Bona fide belief that he did not fall under the “Outdoor catering service” but when have found out that they did and have paid the service tax with interest? Or Section 80 is invokable for setting aside the penalty?

Brief Facts: -

Appellants were running a canteen in a factory situated in the rural areas of Gujarat and providing services of meals etc. to the employees of the factory. The running of canteen came under service tax net with effect from 10.09.04 under the category of “Outdoor catering service”. In the year 2007, the appellants were advised that they were falling under the said service. The appellants then took registration under service tax. They submitted that they were not aware of their tax liability and upon legal advise given to them recently, they have taken registration and offered to pay duty for the past period. They then paid the duty alongwith interest. Department initiated proceedings against the appellant and also imposed penalty of identical amount under Section 78 of the Finance Act. Appellant have come in appeal against the order of the lower authorities.

Appellant’s Contention: -

Appellants have contended that there was genuine belief on the part of appellants that they, being a canteen and not a catering service; they would not get covered under the said service. As such in terms of provision of Section 80, no penalty should be imposed.

Respondent’s Contention: -

It is contended that it was the duty of appellants to get themselves registered and to deposit tax. There is nothing on record to show the bona fides of appellants. Penalty imposed was justified.

Reasoning of Judgment: -

The Tribunal held that the Commissioner (Appeals) has invoked Section 78 only for the reason that ignorance of law is no excuse. Thus the Revenue themselves are of the view that appellants were ignorant about their tax liability. If they believe so, then Section 80 is applicable.

The Tribunal held that there is force in the contention of the appellant that they were under bona fide belief that running of a canteen in a factory would not fall under the “Outdoor catering service”. The submissions of appellant are acceptable that the tax paid by them was available as input credit to the factory and was reimbursable to them. It is a fit case for invoking Section 80 in which case no penalty is imposable under Section 78. Penalty imposed on appellant set aside.

Decision: - Appeal and Stay petition disposed off accordingly.

Case: - Acme Diet Care Pvt Ltd v/s CCE, Ahmedabad

Citation: - 2009 (93) RLT 58 (CESTAT-Ahmd.)

Issue: - Whether unjust enrichment was invokable when excess duty paid was not received from the buyer and debit notes issued for the same?

Brief Facts: -

Appellants are manufacturer of sugar free granules which they regularly supplied to M/s CHL. In one of the consignments cleared by appellants, duty was inadvertently paid on the higher side by adopting Section 4(A) value instead of paying the same in terms of Section 4. Their buyers refused to pay the excess amount to the appellants and accordingly issued debit notes in their favour. The appellant filed refund claim which was rejected by the Lower Authorities on the ground of unjust enrichment.

Appellant’s Contention: -

The appellant contended that the said amount of invoices was never received by them from their customers, which is why the reason, debit notes were issued, so as to account for the higher billing.

Reasoning of Judgment: -

The Tribunal held that the said issue was decided by the High Court of Rajasthan in the case of UOI v/s M/s A.K. Spintex Ltd. & Anr [2009-TIOL-12-HC-RAJ-CX] in which it is held that “….. the price of goods stands reduced to the extent of debit note and credit note, meaning thereby, that after issuance of debit note and credit notes, the price of goods charged by the seller, from the purchaser, is the price, initially billed, minus the amount of the debit note, and credit note, and therefore, when the debit notes and credit notes are issued and effected, which are not disputed, it cannot be assumed, that incidence of burden of excise duty has been passed to the purchaser.”

The Tribunal has relied upon another decision in the case of M/s Jyoti Limited v/s CCE, Vadodara-I [2008 (88) RLT 173 (CESTAT-Ahmd.) in it was laid down that where the buyer has not paid the seller, the fact of issuance of debit notes, cannot be held against them or be relied upon for holding that there was unjust enrichment. By relying upon the settles case law, the Tribunal has set aside the impugned orders.

Decision: - Appeal allowed with consequential relief.

Case: - CCE, Vapi v/s T & D Galiakot Pvt. Ltd.

Citation: - 2009 (93) RLT 13 (CESTAT-Ahmd.)

Issue: - The concept of unjust enrichment also applies to refund of interest prior to amendment of 11.05.08 to Section 11B.

Brief Facts: -

Respondents are manufacturers of M.S. barrels. The duty liability for the months August 2005 to March 2006 was discharged belatedly by few days. Accordingly, they were required to pay interest on such delayed payment. Respondents calculated interest at the rate of Rs. 1000/- per day as against the correct rate of 13% in terms of Notification No. 66/2003-CE (NT), dated 12.09.03. When they realised their mistake, they claimed refund of excess interest so paid by them. The Original Adjudicating Authority admitted that interest was paid in excess and sanctioned the refund but ordered the transfer of amount in Consumer Welfare Fund. On appeal, the Commissioner (A) held in favour of the respondent. Revenue has filed this appeal against the said order.

Reasoning of Judgment: -

The Tribunal has gone through the order of the Commissioner (Appeals) in which it has been held that “ ….the only reason for adjudicating authority to transfer the refund amount to Consumer Welfare Fund is that the appellants (respondent herein) have failed to prove unjust enrichment. The adjudicating authority has held that the amount in question has not been shown as receivables in the balance sheet and therefore the same stands passed on their customers. The appellants on the other hand have submitted that the said expenses could not be shown as receivables in their balance sheet as the facts of excess payment of interest came to their knowledge very late. I find that the adjudicating authority has not disputed appellant’s contentions that the invoices issued by them did not reflect any such payment as receivable by them from their customers and they have also not issued any debit notes to their customers in this respect and as such these submissions are held to be correct. Once these are found to be correct, I find no other way by which the appellants could have transferred the burden of such payment of interest to their customers. I also note that this payment of interest was made for delayed payment of duty on the part of the appellants i.e. for their mistake for which the customers could not be said to be liable. So there can be no reason for transfer of such burden of interest amount to their customers. I also find force in appellant’s arguments that the amount could not be shown as receivables in their balance sheet as the facts of excess payment of interest came to their knowledge very late. Thus I find no reason to support adjudicating authority’s findings of unjust enrichment.”

The Tribunal is in agreement with the submissions of the respondents and also notes that during relevant period 2005-2006, provisions of Section 11B relating to the unjust enrichment was only in respect of refund of duty. The same was not applicable to refund of any interest amount. The said amendment is not retrospective. The revenues contentions cannot be accepted as the provisions of unjust enrichment were not attracted in respect of interest refund.

Decision: - Appeal rejected.

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