In the Customs, Excise and Service Tax Appellate Tribunal, Bangalore
Shri T.K. Jayaraman, Member (Technical)
United Telecom Ltd.
Versus
Commissioner of Central Excise, Bangalore-I
Final Order Nos. 158-159/2009 dt. 3.3.2009 certified on 11.3.2009 in Appeal Nos. E/574 & 792/2007
Per T.K. Jayaraman:
These appeals have been filed against Order-in-Appeal No. 108/2007-CE dated 15.6.2007 and Order-in-Appeal No. 224/2007 dated 8.10.2007 both passed by the Commissioner of Central Excise (Appeals-I), Bangalore.
2. Shri B.N. Gururaj, learned advocate appeared on behalf of the appellants and Mrs. Sudha Koka, learned SDR for the revenue.
3. The learned advocate submitted that when the first Order-in-Appeal No. 108/2007-CE was pending before the Tribunal in CE Appeal No. 574/ 2007, the lower authorities passed orders on identical issue without waiting for the outcome of the appeal from the CESTAT. Since the issue involved in both the appeals is one and the same, I am passing a common order.
4. I heard both sides.
5. The appellants inadvertently took excess cenvat credit. According to the department, they took excess credit of CVD Rs. 2,13,71,810/- and Education Cess of Rs. 4,27,436/-. The above lapse was pointed out by the department on scrutiny of appellant's monthly return ER-1. According to the appellant, the excess credit actually works out to Rs. 82,66,569/- and Education Cess of Rs. 1,65,331/-. They debited the above amounts vide debit entry SL. No. 311 dated 18.2.2005. It is pointed out that after reversing the excess credit taken, the appellant was holding credit balance of nearly Rs. 1.69 crores in their cenvat credit accounts. The issue in the present appeals relates to the demand of interest. The lower authority Original Authority in his order dated 13.11.2006 confirmed a demand of interest of Rs. 6,21,129/-. In fact, the appellant paid that interest even before the Order-in-Original was issued under protest on 29.5.2006. The appellant was aggrieved over the order and approached the Commissioner (A). The Commissioner (A) after examining the legal position upheld the order dated 13.11.2006 passed by the Assistant Commissioner. The appellants are highly aggrieved over the impugned order. In fact, they had also filed a refund claim on 11.10.2006. The Original Authority rejected the said refund claim and the appellant filed an appeal to the Commissioner (A) who upheld the order of the Original Authority in his Order-in-Appeal No. 224/2007 dated 8.10.2007, which is also impugned now.
6. The learned advocate made the following submissions :
(i) Both the lower authorities failed to appreciate the difference between the duty and the interest on delayed payment of such duty. When there was no determination of duty under Section 11A (ii), Section 11AB does not apply. Merely because the appellant had reversed the excess credit wrongly taken, all the consequences that arise in the course of demand under Section 11A do not follow.
(ii) Even after reversing the wrongfully taken credit, they had huge credit balance. As the appellant had not gained any financial accommodation on account of the wrong credit, it would be incorrect to say that what was paid back was not the same credit.
(iii) The ratio of the decision of Hon'ble Gujarat High Court in the case of CCE vs. Gupta Industries - 2006(04)LCX0337 Eq 2006 (205) ELT 0024 (Guj.) is squarely applicable to the present case, even though the Commissioner (A) has tries to distinguish the same.
(iv) There was no material before the lower appellate authority to conclude that the wrongfully taken credit had already been utilized and the credit paid back was out of the subsequently accumulated credit. This was also not an issue in the original proceeding. In raising the ground for rejecting the appeal, the lower authority has traversed beyond the scope of the original proceedings.
(v) Without issue of show cause notice, no demand for recovery of interest on the cenvat credit amount reversed would have been made. Reliance was placed on the following decisions :
a . CCE vs. Sethia Goods 2003 (055) RLT 0037 (CEGAT-Del)=2002(10)LCX0035 Eq 2003 (156) ELT 0395 (Tri-Del.)
b. Cipla Ltd. Vs. CCE 2002 (050) RLT 0550 (CESTAT-Ban.)=2002(03)LCX0180 Eq 2002 (143) ELT 0202 (Tri.-Ban.).
(vi) Even though the following decisions were cited, the lower authorities ignored them.
a . Madhura Coats Pvt. Ltd. Vs. CCE-2005(07)LCX0212 Eq 2006 (193) ELT 0470 (Tri.-Bang.)
b. Sonarum Pvt. Ltd. Vs. CCE -2005 (067) RLT 0066 (CESTAT-Bang.).
(vii) The appellate authority relied on certain decisions which are not relevant and they are inapplicable to the present case.
(viii) Both the authority have ignored the well settled law that interest is not imposable when the amount is paid before the issue of notice. Reliance was placed on the following decisions.
a. CCE vs. Toyota Kirloskar Motors Ltd. 2006(04)LCX0346 Eq 2006 (206) ELT 0116 (Kar.)
b. Commissioner vs. Shree Krishna Pipes Industries Ltd. 2004 (061) RLT 0017 (Kar.)=2004(01)LCX0188 Eq 2004 (165) ELT 0508 (Kar.).
(ix) The department out of revenue's zeal instead of computing interest on the wrongfully taken excess credit amount of Rs. 84,31,900/- has computed on entire sum of Rs. 2,17,99,246/- which includes the excess credit also. This is non-application of mind.
(x) Without considering the appellant's refund claim, the Original authority ought not to have ordered for appropriation of amount which is paid by them which is against all tenets of law.
7. The learned SDR strongly reiterated the impugned orders-in-appeal. She relied on the following case laws.
(i) CCE & C, Aurangabad vs. Padmashri V.V. Patil S.S.K. Ltd. 2006(074) RLT 0218 (Bom.)=2007(07)LCX0015 Eq 2007 (215) ELT 0023 (Bom.)
(ii) K. Ram Kumar vs. CCE, Nagpur 2005(09)LCX0164 Eq 2006 (074) RLT 0097 (CESTAT-Mum.)=2005(09)LCX0046 Eq 2006 (193) ELT 0504 (Tri.-Mum.)
(iii) Kalpataru Power Transmission Ltd. Vs. CCE, Ahmedabad 2005(09)LCX0164 Eq 2006 (194) ELT 0099 (Tri.-Mum.)
(iv) Commissioner of Trade Tax, Lucknow vs. Kanhai Rami Thekedar 2005(04)LCX0035 Eq 2005 (185) ELT 0003 (SC)
(v) Haji Lal Mohd. Biri Works vs. State of U.P. (1974) 3 SCC 137
8. I have gone through the records of the case carefully. It is seen that the appellants had taken excess credit wrongfully. However, when the lapse was pointed out by the department, on the next day, they had reversed the excess credit taken on 29.5.2006. The Original Authority issued an order dated 13.11.2006 confirming the demand of interest of Rs. 6,21,129/- under Rule 12/14 of the Cenvat credit Rules read with Section 11A of the Central Excise Rules. This Bench in the case of Sonorome Pvt. Ltd. cited supra has held that unless the demand is determined under Section 11A (ii), interest under Section 11AA cannot be charged. In other words, there should be a determination of demand before interest can be demanded. Similar decision has taken in the case of Madhura Coats Pvt. Ltd. Vs. Commissioner of Central Excise, Thirunelveli cited supra. In this case also, it is clearly stated that unless the demands are made in terms of Section 11A, no interest can be demanded. In fact, Rule 12/14 providing for recovery of Cenvat Credit wrongly taken, refers to the provisions of Sections 11A and 11AB of the Act. In the present case, when the lapse was pointed out, the credit was reversed. Therefore, there was no need to determine the demand under Section 11A. Moreover, it was submitted that the excess credit was not utilized by the appellant. In that case, the Hon'ble Gujarat High Court's decision in CCE vs. Gupta Industries case (supra) would cover the issue. The decisions cited by the learned SDR are distinguishable on facts. In these circumstances, no interest liability arises in terms of the above cited decisions. Hence, I allow the appeals of the appellant with consequential relief.
Pronounced in Open Court on 3.3.2009.
