Case Law Details
Steel Authority of India Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Chennai addressed an appeal by Steel Authority of India Ltd. (SAIL) against an order concerning the irregular availment of CENVAT credit. SAIL, a manufacturer of steel products, had inadvertently taken double credit and excess credit on certain invoices, totaling ₹5,37,442, during April 2010 to March 2011. Upon detection during a departmental audit, SAIL reversed the excess credit before a Show Cause Notice (SCN) was issued. Subsequently, an SCN was issued demanding recovery of the excess credit along with interest and a penalty. The original authority dropped the penalty, noting SAIL’s sufficient credit balance and its status as a public sector undertaking, suggesting no intent to evade duty but ordered the payment of interest. On appeal by the department, the Commissioner (Appeals) allowed the appeal and imposed a penalty of ₹2,68,721. This led SAIL to file an appeal before the CESTAT Chennai.
The counsel for SAIL argued that the imposition of penalty under Section 11AC requires evidence of fraud, willful misstatement, or suppression of fact, which the department failed to demonstrate. They further contended that interest was not payable as SAIL possessed sufficient credit balance, relying on a judgment by the Karnataka High Court in Commissioner of Central Excise & Service Tax, LTU, Bangalore v. Bill Forge Private Limited. This judgment established that interest is compensatory for delayed tax payment and is not applicable from the date of incorrect credit availment if the credit was not utilized due to sufficient balance. The CESTAT Chennai, after considering the facts and arguments, noted that while SAIL had breached CENVAT Credit Rules by irregularly availing credit, the excess credit was reversed before the SCN and was never utilized for duty payment due to the availability of sufficient credit. Citing the Bill Forge precedent and the fact that SAIL is a public sector unit with no demonstrated intent to evade duty, the CESTAT set aside both the demanded interest and the imposed penalty, modifying the Commissioner (Appeals)’ order and allowing SAIL’s appeal.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The above appeal is filed by Steel Authority of India Ltd. (Appellant) against Order in Appeal No. 26/2015 dated 10.4.2015 passed by the Commissioner of Central Excise (Appeals), Coimbatore. (impugned order).
2. Brief facts of the case are that the appellant is a manufacturer of hot rolled and cold rolled stainless steel products, hot rolled carbon sheets, coils, plates etc. falling under Chapter 72 and 73 of CETA, 1985. They were availing CENVAT credit on inputs, capital goods and input services. On verification of the records during department audit, it was noticed that the appellant during the period between April 2010 and March 2011 irregularly availed CENVAT credit amounting to Rs.5,37,442/- by taking double credit on the same invoice and also taking credit over and above what is specified in the input invoice. On being pointed out, the appellant reversed the excess availed credit of Rs.5,37,442/- before issuance of a Show Cause Notice. However, Show Cause Notice dated 20.11.2013 was issued for recovery of the excess availed credit along with interest and for imposing penalty. After due process of law, the Ld. Original Authority dropped the proposals for penalty in the Show Cause Notice on the ground that the appellant had sufficient credit over and above the irregular availed credit and held that the appellant being a public sector undertaking, there was no intention to evade payment of duty. He however ordered the payment of interest. Aggrieved by the dropping of penalty, department preferred appeal before Commissioner (Appeals), who vide the impugned order allowed the appeal filed by the department but however reduced the penalty to Rs.2,68,721/- being 50% of the duty under Rule 15(2) of the CENVAT Credit Rules, 2004 r/w sec. 11AC(1)(b) of the Central Excise Act, 1944. Hence the appellant is before the Tribunal.
3. Shri V. Srikanth, learned Counsel appeared for the appellant and Shri N. Satyanarayanan, learned Authorized Representative appeared for the respondent.
3.1 The Ld. Counsel for the appellant stated that during the course of audit by the department, it was noticed that they appellant had taken credit of duty / tax twice based on the same invoice. When this was pointed out, the appellant reversed the credit on 06/10/2011 and 12/10/2011. In spite of reversal, a Show Cause Notice was issued on 20.11.2013 with proposal to demand interest and impose penalty. At the time of personal hearing, the appellant requested not to demand interest and impose penalty. But, the learned Joint Commissioner demanded interest but waived penalty. Aggrieved by the OIO, the Revenue preferred an appeal before the Commissioner (Appeals) Salem vide Appeal No. 96/2015-C. Ex. The appeal filed by the Revenue was allowed and a penalty of Rs.2,68,721/- was imposed. Hence the appellant prefers this appeal. He stated that the application of the provisions of section 11AC would depend on the conditions specified therein. To invoke the extended period fraud, willful misstatement, suppression of fact etc has to be shown by the department which they failed to do. They were also not liable to pay interest since they had sufficient credit balance as confirmed by the OIO. They relied on the judgment of the Hon’ble Karnataka High Court in Commissioner of Central Excise & Service Tax, LTU, Bangalore v. Bill Forge Private Limited [2012 (279) E.L.T. 209 (Kar.)] The Ld. Counsel prayed that the impugned order be set aside.
3.2 The Ld. AR has reiterated the points given in the impugned order.
4. I have gone through the facts of the case and have heard the rival parties. I find that this is a case where the appellant had irregularly availed CENVAT credit by taking double credit on the same invoice and also by taking credit over and above what is specified in the invoice input. They had thus breached Rules 4 and 9 of the Cenvat Credit Rules 2004 (CCR 2004) and had committed a blame worthy act. The excess credit was recoverable under Rule 14 of CCR 2004. The appellant has reversed the credit even before issue of SCN and had sufficient credit balance and had not utilised such credit for payment of duty as verified and stated by the Ld. Adjudicating Authority in the OIO. In such circumstances no interest was payable by them as per the ratio of the Hon’ble Karnataka High Court judgment in the case of Commissioner of Central Excise & Service Tax, LTU, Bangalore v. Bill Forge Private Limited [2012 (279) E.L.T. 209 (Kar.)]. The operative part of the judgment is reproduced here under;
“21. Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax, there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly.
(emphasis added)
5. Further although the OIO has invoked an extended period of time, it is settled law that to invoke willful suppression, fraud etc, there must be some positive act which betrays a negative intention of willful default from the side of the assessee to establish a charge of suppression, fraud etc. and not merely an error made. No such act has been shown in the impugned order. In fact, the order accepts that the excess credit was taken inadvertently. However, the appellant is not challenging the revocation of credit. They have only prayed for a waiver of penalty and interest. Considering that the unit is a public sector unit and that the excess credit was not availed a lenient view is called for. In the facts and circumstances of the case, the interest demanded and the fine imposed is set aside.
6. The impugned order is modified on the above terms and the interest and penalty set aside. The appellant is eligible for consequential relief, if any, as per law. The appeal is allowed and disposed of on the aforesaid terms.
(Order pronounced in open court on 20.12.2024)
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