TMI Blog2016 (2) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of interest and penalty do not arise. - Decided in favour of assessee - Civil Miscellaneous Appeal Nos.2576 and 2577 of 2015 and M.P.Nos.1 and 1 of 2015 - - - Dated:- 29-1-2016 - MR. M.JAICHANDREN AND MRS. S.VIMALA, JJ. For The Appellant in both CMAs : Mr. S.D.S.Philip For The Respondents in both CMAs: Mr. A.P.Srinivas COMMON JUDGMENT (Judgment of the Court was delivered by S.Vimala, J.,) These Civil Miscellaneous Appeals have been filed, one filed by the Director and another by the company, as against the orders passed by the Customs, Excise and Service Tax Appellate Tribunal, (CESTAT) Chennai, in Final Order Nos.40318 and 40319 of 2014, dated 09.04.2014. Brief facts:- 2. The appellants were engaged in the manufacture of mercerized cotton yarn during the period from 01.04.2003 to 01.11.2003. Except during this period, i.e., neither before nor thereafter, the mercerized cotton yarn remained exempted from the payment of duty. The appellants procured duty paid grey yarn, mercerized the same and cleared the product without payment of duty during the said period. 2.1. The original authority issued a show cause notice, dated 22.09.2004, as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was allowed by the CESTAT, the question of payment of penalty does not arise. Four years and four months later, i.e., on 22.08.2013, the second respondent again sent a communication, dated 11.02.2013, requiring the appellants to pay penalty. The appellants replied, reiterating the contention that, once the input duty credit was granted by the CESTAT, the question of payment of penalty does not arise. The respondents insisted that the penalty must be paid and threatened stating that, unless the payment is made, recovery proceedings would follow. 2.5. The appellants filed an appeal before the first respondent, challenging the communication, dated 04.10.2013. The first respondent returned the appeal dated 11.12.2013, without giving an opportunity and without assigning any reasons. Therafter, a communication, dated 17.12.2013 was issued, directing the appellants to pay the arrears due to the Department. Thereafter, the appellants approached the third respondent (CESTAT), challenging the letter, dated 17.12.2013, alleging that no penalty is enforceable, when the adjustment of input duty credit as against the demand was held sustainable. The third respondent dismissed the appeal, on 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... num, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 11A till the date of payment of such duty: Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid. 4[(2) The provisions of sub-section (1) shall not apply to cases where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President. Explanation 1.- Where the duty determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder by which such increase in the duty takes effect. Explanation.-For the removal of doubts, it is hereby declared that- (1) the provisions of this section shall also apply to cases in which the order determining the duty under sub-section (2) of section 11A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (2) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person. 4. Having considered the provisions regarding the payment of penalty and interest, the primary question is, when the liability to pay interest and penalty arises. 4.1. The contention of the learned counsel for the assessee is that, when there is no liability at all to pay the tax, in the sense that, the tax payable is already available in the form of CENVAT in the hands of the Department, the liability to pay interest or penalty does not arise for consideration. 4.2. Having regard to the plea taken, it is necessary to state what is CENVAT credit. 4.3. CENVAT credit means excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the detriment of an assessee. Both the letters of the Superintendent are of appealable nature. In any case, his letter dated 4.9.2004 demanding interest with effect from 1.4.2003 under Rule 8(3) (as amended), without prior notice to the party, requires to be set aside on the ground of violation of natural justice. On merits also, such a demand is untenable after the Rajasthan High Court's ruling in Lucid Colloid's case. The view taken by the lower appellate authority that the Superintendent's letter is not appealable is patently erroneous. 5.4. Thus, it is clear that, when the content of the communication was impregnated with missiles (demands), which may at any time, escape and hit against the assessees, then the assessees are entitled to challenge the same, though it is worded as a letter and not as an order . It was really astonishing to read such a finding by the Commissioner of Income Tax (Appeals) that the appeal is not maintainable, by construing the communication as a letter and not as an order. 6. The learned counsel for the respondent submitted that the imposition of interest and penalty is mandatory and the Courts have no discretion to reduce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessees themselves admitted that they are liable to pay duty on mercerized yarn from 01.04.2003 to 01.11.2003 and that it was an offence to have cleared the mercerized yarn without payment of duty. 8.1. It is not the case of the assessees that they are not liable to pay the tax, but the contention is that because of the confusion in the amendment and on account of want of knowledge that they did not pay and that, in any event, the duty payable was already available with the Department (as input credit), there is no question of any evasion or denial or violation of payment of duty. 8.2. The further contention of the learned counsel for the Assessees is that, when the claim of the assessees for the adjustment of the demand with the Cenvat Credit and this denial on the part of the Department was held to be unjustified, then the Department ought not to have proceeded with the claim for penalty and interest after 4 years of delay. It is also pointed out that the show cause notice itself can be issued only in serious cases where there is allegation of fraud, suppression, willful misstatement or for other reasons mentioned in proviso to Section 11A(1) of the Act and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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