MAHINDRA AND MAHINDRA Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The appellants are manufacturers of motor vehicles. They used to conduct annual stock -taking of their fixed assets. In July 2003, they found discrepancies with regard to the stock of capital goods in the course of annual stock -taking. On the capital goods which was found short, MODVAT/CENVAT credit totalling to Rs. 18,48,965/ - had been taken. This amount was reversed in their CENVAT account in January 2005. The department issued a show -cause notice dated 18.11.2005 (a) for appropriation of the above amount towards demand of differential duty under the relevant MODVAT/CENVAT Credit Rules read with Section 11A(1) and Section 38A of the Central Excise Act; (b) for recovery of interest under Section 11AB of the Act to the extent of Rs. 3,71,568/ - on the aforesaid amount of duty under Rule 12 of the CENVAT Credit Rules, 2001/2002 and Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A(1) of the Act; (c) for imposing penalties under Section 11AC of the Act and Rule 13/15 of the CENVAT Credit Rules, 2001/2002/2004. All these proposals were contested. In adjudication of the dispute, the Asst. Commissioner confirmed the demand of interest amounting to Rs. 3,71,568/ - against the party under Section 11AB of the Act. The order of adjudication was sustained by the Commissioner (Appeals). Hence the present appeal.

(2.) Heard both sides. It has been argued on behalf of the appellant that Rule 12 of the CENVAT Credit Rules is not applicable to the facts of this case and consequently, no interest could be levied from the appellant under Section 11AB of the Act. With reference to the facts of this case, the appellant has also relied on the Tribunal's decision in Widia India Ltd. v. CCE : 2007 (207) ELT 562 (Tri -Bang). On the other hand, the ld. DR has relied on the Supreme Court's judgment in CCE v. SKF India Ltd., 2009 TIOL 82 SC -CX wherein it was held that, under the scheme of Sections 11A, 11AA, 11AB and 11AC of the Central Excise Act, interest was leviable on delayed or deferred payment of duty for whatever reasons. It is submitted that, though liability for payment of differential duty of over Rs. 18 lakhs was accepted by the appellant in July 2003 in respect of the capital goods not found in stock, this duty was paid by them only in January 2005. Where an amount of duty payable to the exchequer was withheld wrongfully for a period of time, the appellant was liable to pay interest thereon for such period. According to the DR, the Hon'ble Supreme Court's ruling in SKF India case renders the appellant inescapably liable to pay this interest. He also refers to the relevant allegations and averments contained in the show -cause notice. He has sought to make out a case for the Revenue that the capital goods which were found short in stock should be deemed to have been not received in factory and, consequently, the MODVAT/CENVAT credits in question are liable to be held to have been wrongly taken and utilised. In this manner, the DR has opposed the contention that Rule 12 is inapplicable.

(3.) It appears from the above provision that the liability to pay interest on an amount of CENVAT credit would arise where such credit had been taken or utilised wrongly. The case of the appellant is that the capital goods were received in their factory and used for manufacture of excisable goods and that, upon receipt of the capital goods in the factory, MODVAT/CENVAT credit had been rightly taken and subsequently utilised. Conspicuously, in this case, the Revenue has no case to the contra. In the circumstances, in my considered view, Rule 12 was not invocable. Rule 14 of the CENVAT credit Rules, 2004 reads identically and, therefore, the above conclusion is equally applicable in the context of considering the applicability of Rule 14. Where the applicability of Rule 12/14 is ruled out, it is not necessary to examine the applicability of Section 11AB of the Act.