TMI Blog2023 (5) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... tice. On being informed, the issue should have been settled under Section 11A(2B) of the Central Excise Act - Reliance placed in the decision in the case of COMMISSIONER OF CENTRAL EXCISE-I VERSUS GAURAV MERCANTILES LTD. [ 2005 (8) TMI 120 - BOMBAY HIGH COURT] where it was held that Factual matrix reveals that the show cause notice was issued on 19-4-2002 whereas entire amount of duty and penalty was paid on 31-1-2001 and 1-9-2001. It is thus clear that the entire duty liability was paid prior to the issuance of show cause notice. The order of the Commissioner to the extent of imposition of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act cannot be upheld. Appeal allowed in part. - Excise Appeal No. 85414 of 2013 - FINAL ORDER NO. 85463 / 2023 - Dated:- 24-2-2023 - HON BLE MR. SANJIV SRIVASTAVA , MEMBER ( TECHNICAL ) And HON BLE DR. SUVENDU KUMAR PATI , MEMBER ( JUDICIAL ) Shri Rajesh Ostwal , Advocate , for the Appellant Shri Deepak Bhilegaonkar , Additional Commissioner , Authorised Representative for the Respondent ORDER PER : SANJIV SRIVASTAVA This appeal is directed against Order-in- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods during the period April 2007 to April 2009 as shown in Annexure 'A' to this show came notice should not be demanded and recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with the proviso to Section 11A (1) of the Central Excise Act, 1944 (Now Section 11A1a of Central Excise Act, 1944 as amended by Finance Act, 2011). (b) Interest on the above amount should not be recovered from them under Section 11AB of Central Excise Act, 1944 (now Section 11AA of the Central Excise Act, 1944 as amended by Finance Act, 2011). (c) The amount of Rs. 3.13.57,481/- (Three Crore Thirteen lac Fifty Seven Thousand Four Hundred Eighty One only) and interest amounting to Rs. 1,26,11.353/- (One Crore Twenty Six lac Eleven Thousand Three Hundred Fifty Three Only) paid by M/s HII. (as detailed at para 8 above) should not be appropriated towards the duty and interest liability as above (e) Penalty should not be imposed upon them under Rule 15 (2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 2.2 This show cause notice has been adjudicated by the Commissioner by the impugned order. Aggrieved appellant has prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty leviable under section 3 of the Customs Tariff Act 1975, during the period April 2007 to April 2009. During the course of CERA Audit, it was noticed that, all the imports were made under EPCG scheme and the assessee has availed the benefit of Customs notification No. 97/2004 dated 17.9.2004 (upto April 2008) and Notification No. 64/2008 dated 9.5.2008 (after April 2008). Thus, in respect of the said 9 bills of entry, the assessee has not paid additional duty, however, they availed credit of additional duty on these capital goods imported under EPCG scheme. Hence, the credit of Additional duty was wrongly availed by the assessee. The assessee has also not disputed the wrong availment of credit. The assessee agreed that they have availed the credit of additional duty by mistake. They contended that they also imported capital goods under DEPB scheme and in respect of such capital goods they have been availing additional duty paid. Accordingly, they have mechanically availed the credit of additional duty on capital goods imported under the EPCG scheme also. Admitting their mistake they have paid the wrongly availed credit total amounting to Rs. 3,13,57,481/- alongwith interest. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the immediately following words with intent to evade payment of duty . From the gist of the case laws cited above, it is observed that penalty under Section 11AC is not imposable when the ingredients of willful suppression of fact, mis-statement, collusion etc. are not present. In this case, I find that, the credit was availed during the period April 2007 to April 2009, the assessee not disclosed the irregular availment of credit on their own. It came to light has not d only at the time of Audit conducted by CERA. But for the Audit of CERA, the irregularity of availment of credit could have gone unnoticed. Even though the assessee claimed that there is no willful suppression of facts or intention to avail wrong credit on their part, the facts remains that the assessee has availed irregular credit and has not disclosed the same to the department. 28. Rule 15(2) of Cenvat Credit Rule provides for imposition of penalty on wrong availment of credit. For sake of reference the said rule is reproduced below: In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilized wrongly by reason of fraud, collusion or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any reason by which it could have been concluded that the case of willful suppression/misstatement, collusion etc. has been made out against the appellant. The mistake committed by the appellant could have been an inadvertent mistake. In the case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] Hon ble Supreme Court has clearly stated that without proving the existence of such ingredients, penalty under Section 11AC should not have been imposed. Relevant paras of the said judgment are reproduced below:- 17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to subsection 1 of Section 11A and Section 11AC use the same expressions : ....by reasons of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,... . In other words the conditions that would extend the normal period of one year to five years wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the IT Act ) taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not to impose any penalty. The Division Bench made reference to Rule 96ZQ and Rule 96ZO of the Central Excise Rules, 1944 (in short the Rules ) and a decision of this Court in Chairman, SEBI v. Shriram Mutual Fund Anr. [2006 (5) SCC 361] and was of the view that the basic scheme for imposition of penalty under section 271(1)(c) of IT Act, Section 11AC of the Act and Rule 96ZQ(5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated which he knows or has reason to believe . The said clause referred to wilful action. According to learned counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11AC. Where the outer limit of penalty is fixed and the statute provides that it should not exceed a particular limit, that itself indicates scope for discretion but that is not the case here. 23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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