M/S. SADASHIV CASTING LTD., Vs. CCE, CHANDIGARH

JUDGEMENT

(1.) A show cause notice dated 23.8.2004 was issued to the appellants alleging that they had taken Cenvat credit amounting to Rs. 6,59,925/ - on the basis of fake/invalid invoices and that though the Cenvat credit has been reversed, they are liable for payment of interest on the wrongly taken Cenvat credit and also liable for imposition of penalty under Rule 13 of Cenvat Credit Rules. The show cause notice was adjudicated by the Asst. Commissioner vide Order -in -Original dated 13.10.2004 by which interest demand of Rs. 1,09,562/ - under Rule 12 of Cenvat Credit Rules read with Section 11AB of the Act was confirmed. Besides this, penalty of equal amount of Rs. 6,59,925/ - was imposed on the appellants under Rule 13 of Cenvat Credit Rules read with Section 11AC of the Central Excise Act. The Asst. Commissioner also ordered for adjustment of Rs. 1,35,000/ - which had already been deposited towards penalty and, extended the benefit of reduced penalty under the first proviso of Section 11AC in case the appellants deposits the balance amount of interest confirmed along with 25% of the amount of penalty within thirty days from the communication of the adjudication order. The appellants did not pay interest and 25% penalty within the period mentioned in the order of the Asst. Commissioner and filed appeal before the Commissioner (Appeals). The Commissioner (Appeals) allowed the appeal setting aside the order of interest and penalty on the ground that the entire amount of Cenvat credit had reversed even prior to the issue of show cause notice. The Commissioner (Appeals) followed the Tribunal s Order in the case of CCE, vs. Machino Montell (I) Ltd., reported in 2004 (62) RLT 709 (CESTAT -LB). On appeal, being filed by the department against the order of the Commissioner (Appeals), the Tribunal vide Final Order No. 274/07 -SM(BR) dated 19.12.2006 remanded the matter to the Commissioner (Appeals) for de novo decision in the light of the judgement of the Hon ble Punjab & Haryana High Court in the case of Machino Montel (I) Ltd., reported in 2006 (202) ELT 348 (P and H) by which the Hon ble High Court had reversed the Larger Bench decision of the Tribunal in the case of CCE vs. Machino Montel (I) Ltd. (supra). In de novo proceedings, the Commissioner (Appeals) vide Order -in -Appeal No. 309/CE/CHD/2007 dated 14.8.2007 upheld the order -in -original. It is against this order of the Commissioner (Appeals) that the present appeal has been filed.

(2.) HEARD both sides.

(3.) SHRI Atul Gupta, learned Counsel for the appellants, pleaded that in this case the issue before the Tribunal is as to whether the interest is chargeable on Cenvat credit reversed by the appellants which was taken by the appellants. He pleaded that the appellants were instructed by the department to reverse the credit and at that point of time credit was not utilized, that in view of this, no interest is chargeable; that in this regard he relies upon decision of Honble Punjab & Haryana High Court in the case of CCE, Delhi -III vs. Maruti Udyog Limited, reported in 2007 (214) ELT 173 (P & H); that looking to the cirumstances of the case, no penalty is imposable; that in any case since the entire amount of Cenvat credit was reversed prior to the issue of show cause notice in accordance with first proviso to Section 11AC, the benefit of reduced penalty equal to 25% of the duty amount should have been given; that though the Asst. Commissioner had given this option to pay the interest and 25% of penalty within 30 days, the appellants had immediately filed an appeal before the Commissioner (Appeals) and the Commissioner (Appeals) vide order dated 3.11.2004, which was issued within 30 days, set aside the order of the Asst. Commissioner; that the interest and 25% of the penalty amount was paid within 14 days of the de novo order -in -appeal passed by the Commissioner (Appeals); that in view of this, and keeping in view the decision of Honble Delhi High Court in the case of K.P. Pouches (P) Ltd. vs. UOI, reported in 2008 (228) ELT 31 (Del.) benefit of reduced penalty under Section 11AC should have been given.