Case Law Details
Synthokem Labs Pvt Limited Vs Commissioner of Central Tax (CESTAT Hyderabad)
The only issue remains now is as to whether the case in hand was merely a case of wrong apportionment of credit between the appellants both units, a bonafide clerical error or it was a case of intentional malafide intention to evade payment of duty. Though the amount was not proportionately bifurcated between both the units of the appellants but simultaneously it is an admitted fact that the amount of Rs. 2,54,199/- was not further distributed to the second unit of the appellant despite being claimed by the first unit. So the eligibility of claim of credit of Rs. 8,28,621/- stand admitted. This is sufficient for me to hold that there has been no evasion but only an error between the two units of the appellant for availing the credit without bifurcating the same inter se. However, deficiency was made good even before the issue of impugned show cause notice dated 28.7.2013 and the credit were properly being recorded in their ER 1 returns at the time of taking the same and also at the time of reversing the same. Once those have been properly recorded in the books of accounts of the appellants, the allegation of intentional evasion remains only assumption having no legs to stand upon.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
The Order-in-Appeal No. 002-003-19-20 dated 16.09.2019 has been assailed vide the impugned appeal. The appellants herein are engaged in the manufacture of bulk drugs and are availing the CENVAT Credit on inputs, capital goods and input services. They are simultaneously utilising the same for payment of duty on their final products. During the course of Audit of records of the appellant, the Audit officers noticed that the appellants have short paid the service tax and had erroneously availed the CENVAT credit for the period 2013-2014 to 2014-2015-2016 for the following:
i) Excess availment of input service credit of Rs.6,89,256/- in the ER-1 returns;
ii) Irregular availment of input service tax credit taken on irregular services amounting to Rs.2,20,969/- for the period 2013-2014 and 2015-2016.; and
iii) Irregular availment of input service tax credit taken on common input services amounting to Rs. 2,54,199/-.
2. Pursuant thereto an amount of Rs.11,64,361/- alleged to be irregular availment of CENVAT Credit was proposed to be recovered vide Show Cause Notice bearing No. 30/63/2015-16/Gr62 dated 28.07.2017 along with the interest and the proportionate penalties. The said proposal was partly accepted by the Original Adjudicating Authority to the extent of the amount of CENVAT Credit on input services – Rs.4,75,168/- along with the penalty of same amount on the appellant vide Order-in-Original No. 01/2019 dated 17.01.2019. The said order has been upheld vide Order under challenge. Being aggrieved the appeal is before this Tribunal.
3. I have heard Shri R Muralidhar, learned Counsel appearing for the Appellant and Shri L V Rao, learned Authorised Representative appearing for the Department.
4. It is submitted that initially the CENVAT Credit was alleged to be irregular for an amount of Rs. 11,64,424/-. The appellants were eligible for most of said credit. Still they reversed the same in August, 2016 itself and have also reflected in the monthly ER 1 return of August, 2016. At the time of reversal, they were having much more balance in their CENVAT Credit account. As such, no interest was paid by them with respect to the demand confirmed for Rs.4,75,168/-. It is submitted that same was only a cause of wrong operation of the credit between the appellants second unit and it was not at all the case of non eligibility of CENVAT credit for the appellant. The only mistake committed was failure to bifurcate the available credit between both the units, no intention to evade the money of the Government exchequer was at all there. Still the amount of Rs. 2,54,199/- which was to be transferred for the second unit of the appellant was reversed in August, 2016 itself. In absence of such an intention, penalty has wrongly been imposed. It is submitted that the extended period of limitation also has been wrongly invoked. The order under challenge is accordingly, prayed to be set aside while relying upon the following case laws learned Counsel prayed for appeal to be allowed.
1. Gannon Dunkerely & Co. Ltd. vs. Commissioner (ADJ) of ST, New Delhi [2021 (47) GSTL 35 (Tri-Del)];
2. Accurate Chemicals Industries vs CCE, NOIDA 2014 (300) ELT 451 (Tri-Del)];
3. CCE NOIDA vs Accurate Chemicals Industries [2014 (310) ELT 441 (All)]
4. Sterlite Telelink Ltd. vs. CCE Vapi [2014 (312) ELT 353 (Tri-Ahmd) (3rd Member Ref Bench)];
5. BSNL vs. Commissioner of C.Ex. & S T Jaipur I [2019 (369) ELT 1759 (Tri-Del)];
6. Jaypee Greens Vs Commissioner of Customs C.Ex. & ST, NOIDA [2020 (33) GSTL 109 (Tri-All)];
7. Krishna Electrical Industries Ltd. vs. CCE Indore [2013 (292) ELT 385 (Tri-Del)];
8. CCE Salem vs Madras Aluminium Co. Ltd. [2017(349) ELT 133 (Mad)];
9. Gujarat Boron Derivatives Pvt. Ltd. vs CCE, C & ST(A), Vadodara [2017(348) ELT 105];
10. Garden Silk Mills Ltd. vs CCE Cus & ST, Surat [2016 (332) ELT 820 (Tri-Ahmd)];
11. CCE, Allahabad vs. Balarampur Chini Mills Ltd. [2014 (300) ELT 449 (Tri-Del)]
5. Per contra, learned Authorised Representative submitted that it is not disputed by the appellant that they had irregularly availed the CENVAT credit amounting to Rs.4,75,168/-. Initially infact they have reversed the same after it was being pointed out by the Department. It is impressed upon that this fact is sufficient to hold that the appellant were aware of the wrong been committed by them. But still they did not undo the same till it was pointed out by the Department. The said act is sufficient to reflect the intentional evasion on the said act and the non disclosure of such transaction to which the appellants alone were responsible have to be considered as the one with an intention to evade payment of tax. Accordingly, Rule 15(2) of CCR, 2004 gets attracted along with section 11AC of Commissioner of Central Excise Act, 1944. Both these provisions are applicable to the situation of taking credit by reason of suppression with intent to evade payment of duty and the provisions required imposition of penalty as such. There is no illegality being committed by the authorities below while imposing penalty upon the appellants. Learned Authorised Representative have impressed upon that in the era of self assessment, the onus strictly lies upon the assessee to disclose the intention to the Department. The nondisclosure amounts to wilful suppression which invites penalties. The order accordingly, is prayed to be upheld and appeal prayed to be dismissed.
6. After hearing the parties and perusal of the entire record, I observe and held as follows:-
Apparently and admittedly out of the total demand of Rs.11,64,424/- major amount of Rs. 6,89,256/- pertaining to the alleged excess availment of input service tax credit has already been held not assessable by both the adjudicating authorities below. The remaining amount of Rs.4,75,168/- pertaining to the alleged irregular availment of inputs service tax credit taken on any irregular service (Rs.2,20,969/-) and alleged irregular availment of inputs service tax credit taken on common inputs service Rs. 2,54,199/- was reversed in August, 2016 itself immediately after the audit team raised the objection. Also, it is admitted fact that appellant carried much more balance in their CENVAT credit account when they reversed the aforesaid amount, due to which the authorities below have accepted that there is no liability of the appellant to pay interest thereupon.
7. The only issue remains now is as to whether the case in hand was merely a case of wrong apportionment of credit between the appellants both units, a bonafide clerical error or it was a case of intentional malafide intention to evade payment of duty. Though the amount was not proportionately bifurcated between both the units of the appellants but simultaneously it is an admitted fact that the amount of Rs. 2,54,199/- was not further distributed to the second unit of the appellant despite being claimed by the first unit. So the eligibility of claim of credit of Rs. 8,28,621/- stand admitted. This is sufficient for me to hold that there has been no evasion but only an error between the two units of the appellant for availing the credit without bifurcating the same inter se. However, deficiency was made good even before the issue of impugned show cause notice dated 28.7.2013 and the credit were properly being recorded in their ER 1 returns at the time of taking the same and also at the time of reversing the same. Once those have been properly recorded in the books of accounts of the appellants, the allegation of intentional evasion remains only assumption having no legs to stand upon.
8. This Tribunal at Allahabad Bench in the case of Jaypee Greens vs CC & CE & ST, NOIDA reported in [2020 (33) GSTL 109] has held that where wrongly availed credit so reversed by the appellants by reflecting in their ST 3 return even prior to show cause notice issue, the longer period of limitation cannot be invoked. The demand raised by the department was held to be barred by time. The decision of Hon’ble High Court of Delhi in the case of Hindustan Insecticide vs. CCE reported in 2013-TIOL-631-HC- DEL-CX was relied upon. Infact when there was reversal even before the issue of show cause notice, infact show cause notice was not required to be issued in terms of provisions of section 11A (2)(b), as it was held by this Tribunal Delhi Bench in the case of Krishna Electrical Industries Ltd. vs CCE, Indore reported in [2013 (292) ELT 385]. No doubt tax scheme is self assessment scheme and the onus lies upon the assessee to disclose the information to the department as has been impressed upon by the department but each non disclosure cannot be called as the suppression, that too with malafide intent to evade payment of duty. It is only in this case that extended period of limitation can be invoked and the penalty can be imposed. Hon’ble Apex Court in the case of Continental Foundation Jt. Venture vs. CCE reported in [2007 (216) ELT 177(SC)] has held that something positive other than mere inaction or non-payment of duty is required for invoking extended period under proviso to section 11A(1) of Central Excise Act and that suppression means failure to disclose full information with intent to evade the payment of duty and mere omission to give certain information is not suppression of fact unless it is deliberate with intention to evade the payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. Above all, suppression of facts is clearly qualified by word wilful in the section. Hence, presence of mensrea to evade duty has to be there. From the facts as discussed above since there has been prompt reversal by the appellant that too of a such amount which was meant for the appellants own both units, however was utilised only by one unit. Hence allegation of wilful mis statement with an intent to evade payment rather not at all justified. Though the adjudicating authority below had been right while dropping the demand on the same ground by holding it to be mere clerical error, they have definitely got wrong while still imposing penalty. The order accordingly is hereby set aside. Consequent to above discussion, appeal stands allowed.
(Pronounced in the open Court on 09.11.2021 )
