IT -Concealment penalty upheld as return was not filed by assessee despite having taxable income
IT : Where no valid return of income was filed by assessee within time limit provided under section 139 or section 142(1) despite having taxable income, penalty under section 271(1)(c) was leviable
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[2013] 33 taxmann.com 288 (Chennai - Trib.)
IN THE ITAT CHENNAI BENCH 'B'
T.V. Magaadevan
v.
Deputy Commissioner of Income-tax, Central Circle II(4), Chennai*
N.S. SAINI, ACCOUNTANT MEMBER
AND Challa Nagendra Prasad, JUDICIAL MEMBER
AND Challa Nagendra Prasad, JUDICIAL MEMBER
IT Appeal Nos. 367 & 368 (Mds.) of 2011
[ASSESSMENT YEARS 2004-05 & 2005-06]
[ASSESSMENT YEARS 2004-05 & 2005-06]
SEPTEMBER 28, 2012
Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income [Illustration] - Assessment years 2004-05 and 2005-06 - Whether when an addition is made on assessment and penalty proceeding under section 271(1)(c) is initiated in course of assessment, then same shall constitute satisfaction of Assessing Officer for initiation of penalty - Held, yes - Whether where no valid return of income was filed by assessee within time limit provided under section 139 or within time limit provided in notices issued under section 142(1), entire income assessed in assessment order amounted to addition made by Assessing Officer in assessment and in such case penalty under section 271(1)(c) was leviable - Held, yes [Para 12] [In favour of revenue]
CASES REFERRED TO
Smt. Maya Rani Punj v. CIT [1986] 157 ITR 330/24 Taxman 1 (SC) (para 9) and Prakash Nath Khanna v. CIT [2004] 266 ITR 1/135 Taxman 327 (SC) (para 9).
K. Ravi for the Appellant. K. Ramasamy for the Respondent.
ORDER
N.S. Saini, Accountant Member - These are the appeals filed by the assessee against separate orders of the CIT(A)-II, Chennai, dated 15.12.2010.
2. In both the appeals, the assessee has raised common ground of appeal which is that the CIT(A) erred in upholding the order of the Assessing Officer levying penalty u/s 271(1)(c) of the Act.
3. The brief facts of the case are that the assessee filed return of income for assessment year 2004-05 on 12.12.2006 showing income of Rs. 4,99,140/- and for assessment year 2005-06 filed return of income on 31.12.2007 showing income of Rs. 10,49,250/-. The Assessing Officer issued notice u/s 142(1) of the Act for assessment year 2004-05 on 27.12.2004 and for assessment year 2005-06 on 1.2.2007. As the return of income was filed beyond the time allowed under the Income-tax Act, he treated the return filed as invalid. The assessment was framed for both the years under consideration by passing an order u/s 144 of the Act determining the income for both the years under consideration as per the income computation statement filed by the assessee.
4. Thereafter, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act, in response to which the assessee filed letter dated 18.1.2007 in assessment year 2004-05 and letter dated 23.6.2008 in assessment year 2005-06. In the said letters, it was submitted by the assessee that the assessee filed return of income and paid taxes thereon; the assessee furnished the bank statement during the assessment proceedings; the assessee had not concealed any particulars of income or furnished inaccurate particulars of such income and that the Assessing Officer completed the assessment u/s 144 of the Act accepting the income returned which shows that there was no concealment of income by the assessee.
5. The Assessing Officer rejected the submissions of the assessee by observing that the assessee filed return of income only after the issue of notice u/s 142(1) and that too after a lapse of time allowed for filing a valid return. He also observed that thought he assessee had taxable income he had not paid any advance tax but paid the tax with interest in December 2006 for assessment year 2006 for assessment year 2004-05 and in December 2007 for assessment year 2005-06. He also observed that the case of the assessee was similar to the circumstances stated under Explanation 3 to section 271(1)(c) of the Act. Hence, he levied penalty of Rs. 1,23,742/- in assessment year 2004-05 and Rs. 3,23,995/- in assessment year 2005-06 being the minimum amount of penalty leviable.
6. The assessee went in appeal before the CIT(A) for both the years. The assessee argued that the penalty was not leviable as per Explanation 3 to section 271(1)(c) of the Act because the assessee had furnished a return within the period specified in section 153(1). It was also argued that Explanation 3 to section 271(1)(c) was not applicable to the case of the assessee and levy of penalty by the Assessing Officer evidently based on the said Explanation is invalid. The assessee argued that penalty cannot be levied for non-payment of advance tax. It was also submitted that it is clear that there was no satisfaction arrived at by the Assessing Officer that there was any concealment of income and that the satisfaction, if any, was only to the extent that the assessee has not paid the advance tax. The assessee also argued that the assessment was completed accepting the income returned by the assessee without any modification and therefore, it cannot be said that any particular of income were concealed by the assessee or any inaccurate particulars were furnished. It was also submitted that initiation of proceedings u/s 271(1)(c) of the Act by adding a line at the bottom of the assessment order is done in a mechanical manner without indicating that there was due application of mind prior to the same. It was further submitted that the assessee being away at Tanjavur with his A.R. at Chennai had a reasonable cause for the delay in filing his return but he had paid the taxes before filing the return and therefore, levy of penalty u/s 271(1)(c) of the Act was not valid.
7. The CIT(A), after considering the submissions of the assessee, confirmed the penalty by making similar observations except change in figures in both the years under consideration as under:
"11. I have considered the submissions of the learned A.R. It is undisputed that the appellant had taxable income (lease rent from Dhanvanthry medical Shop) but did not file his return of income by the due date and did not pay any advance tax. This act of the appellant constitutes concealment u/s 271(1)(c) because when there was a taxable lease rental income the appellant concealed it by not furnishing his return and continued to do so even after a notice u/s 142(1) was issued by the A.O. and the appellant was repeatedly reminded by him. The explanation that he had reasonable cause as he was away at Tanjavur and his representative was at Chennai is untenable and clearly an afterthought because such a submission was never made before the A.O. during the assessment/penalty proceedings though the A. R. of the appellant was appearing before the A.O. during the assessment/penalty proceedings. The appellant is therefore liable for levy of penalty u/s 271(1)(c) on the income assessed even when it is the same as shown in the return form filed on 12.12.2006. The penalty of Rs. 1,23,742 levied u/s 271 (l)(c) is, therefore, sustained."
8. Before us, the A.R reiterated the submissions made before the lower authorities.
9. On the other hand, the CIT/DR supported the orders of the lower authorities. He, relying on the decision of Hon'ble Supreme Court in the case of Smt. Maya Rani Punj v. CIT [1986] 157 ITR 330/24 Taxman 1, submitted that the Hon'ble Supreme Court has held that in view of the language used in the section, the position was beyond dispute that the Legislature intended to deem the non-filing of the return to be a continuing default - the wrong for which penalty was to be visited, commenced from the date of default and continued month after month until compliance was made and the default came to an end. He further submitted by relying on the decision of the Hon'ble Supreme Court in the case of Prakash Nath Khanna v. CIT[2004] 266 ITR 1/135 Taxman 327, that the Hon'ble Supreme Court has held that infractions which are covered by section 276CC relate to non-furnishing of return within the time in terms of sub-section (1) or indicated in the notice given under sub-section (2) of section 139; there is no condonation of the said infraction even if a return is filed in terms of sub-section (4); section 276CC refers to 'due time' in relation to sub-sections (1) and (2) of section 139 and not to sub-section (4). He further submitted that on the earlier occasion when the matter came up for hearing before the Tribunal, the Tribunal has specifically asked as to whether the returns in the earlier assessment years were filed in time by the assessee or not. He submitted that inspite of a specific query raised by the Bench, the A.R of the assessee, even till today, has not filed the relevant assessment orders or any other evidences evidencing that the returns in the earlier years were filed in time by the assessee. He submitted that the assessee is a habitual defaulter and in none of the earlier previous years the assessee had filed the returns of income in time. He submitted that the assessee intentionally delayed the returns and filed just at the nick of time when the assessment was getting time barred so that the Assessing Officer could not carry out any investigation and verification. Thus, the assessee was very tactfully avoiding investigation by the Assessing Officer. He vehemently supported the orders of the lower authorities and submitted that the assessee should be visited in these years with penalty so that in the years to come the assessee who is having scant regard for the law will come to respect the law and comply with the same by filing the returns in time.
10. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. In the instant case, the Assessing Officer levied penalty u/s 271(1)(c) of the Act of Rs. 1,23,742/- in assessment year 2004-05 and Rs. 3,23,995/- in assessment year 2005-06 on the ground that the assessee has filed no valid return of income within the time allowed under the Income-tax Act, though the assessee had taxable income and in spite of the fact that notice u/s 142(1) was issued to the assessee.
11. On appeal, the CIT(A) confirmed the order of the Assessing Officer.
12. Before us, the assessee contended that levy of penalty u/s 271(1)(c) of the Act was not valid as no satisfaction as required under law was recorded by the Assessing Officer in the relevant assessment order before initiating penalty u/s 271(1)(c) of the Act. We find that a perusal of the relevant assessment order shows that the Assessing Officer has recorded that "penalty proceedings u/s 271(1)(c) of the Act is initiated separately". Thus, in view of the provisions of section 271(1B) of the Act which was inserted in the Act with retrospective effect from 1.4.1989 and which provides that when an addition is made on assessment and penalty proceeding u/s 271(1)(c) of the Act is initiated in the course of the assessment, then the same shall constitute satisfaction of the Assessing Officer for initiation of penalty. In the instant case, as it is not in dispute that no valid return of income was filed by the assessee within the time limit provided u/s 139 of the Act or within the time limit provided in the notices issued u/s 142(1) of the Act, the entire income assessed in the assessment order amounts to addition made by the Assessing Officer in the assessment. Thus, we do not find any force in the above argument of the A.R of the assessee. The other contention raised by the A.R was that the assessed income in the instant case is the same which was shown by the assessee in the return of income. We find that the assessee has filed its return of income for the assessment year 2004-05 on 12.12.2006 and for the assessment year 2005-06 on 31.12.2007. Thus, the aforesaid returns of income were not valid returns as they were not filed within the time allowed u/s 139(4) of the Act and in view of Explanation 3 to section 271(1)(c) of the Act the entire assessed income constitutes the concealed income. The last argument of the A.R of the assessee was that the returns were filed within the time allowed u/s 153(1). However, the A.R could not point out why penalty u/s 271(1)(c) of the Act is not leviable when the return is not filed within the time allowed u/s 139 of the Act when the assessee had taxable income and how the default is mitigated by filing the return before the time limit of completion of assessment specified u/s 153(1) of the Act. In these circumstances, we do not find any good reasons to interfere with the order of the CIT(A). It is confirmed. The grounds of appeal of the assessee for both the assessment years under consideration are dismissed.
13. No other point was argued or pressed at the time of hearing.
14. In the result, both the appeals of the assessee are dismissed.
USP *In favour of revenue.
IT-Interest paid on borrowings undertaken for expansion of existing plant is an allowable exp.
IT: Interest on amount borrowed for expansion of business for an existing plant is allowable under section 36(1)(iii)
IT : Where no disallowance of preliminary expenses under section 35D was made in last seven years same was allowable in current year as per rule of consistency
IT : Where depreciation claim is allowed to assessee-lessor in earlier years, same is to be allowed in current year also
IT : Premium on redemption of debentures spread over number of years is proportionately allowable as revenue expenditure under section 37(1)
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[2013] 33 taxmann.com 265 (Gujarat)
HIGH COURT OF GUJARAT
Deputy Commissioner of Income-tax, Bharuch Circle
v.
Gujarat Narmada Valley Fertilizers Co. Ltd.*
AKIL KURESHI AND MS. SONIA GOKANI, JJ.
TAX APPEAL NO. 513 of 2012†
MARCH 12, 2013
I. Section 36(1)(iii) of the Income-tax Act, 1961 - Interest on borrowed capital [Expansion of business] - Whether interest on amount borrowed for expansion of business for an existing plant is allowable under section 36(1)(iii) - Held, yes [Para 2][In favour of assessee]
II. Section 35D of the Income-tax Act, 1961 - Preliminary expenses [Illustrations] - Assessee claimed deduction under section 35D - Assessing Officer restricted claim to an extent that had nexus with eligible projects - Tribunal, however allowed claim holding that no such disallowance was made in last seven years and such claim could not be disallowed suddenly - Whether, following rule of consistency, Tribunal correctly allowed claim of assessee - Held, yes [Para 4][In favour of assessee]
III. Section 32 of the Income-tax Act, 1961 - Depreciation - Allowability/rate of [Lease] - Whether, where assessee was a financer-lessor and revenue could not prove that assessee did not have any interest in assets, depreciation claim was allowable following rule of consistency - Held, yes [Para 5][In favour of assessee]
IV. Section 37(1) read with section 36(1)(iii) of the Income-tax Act, 1961 - Business expenditure - Allowability of [Premium on redemption of debentures] - Assessee had paid premium on redemption of debentures which was spread over a period of 5 years - It claimed deduction of same proportionately either under section 36(1)(iii) or under section 37 (1) - Whether, where discounted amount paid over and above amount received for debentures was a liability incurred by company for purposes of business, same was allowable as revenue expenditure under section 37(1) and not under section 36(1)(iii) - Held, yes [Para3] [In favour of assesee]
CASE REVIEW
Saurashtra Cement & Chemical Industries Ltd. v. CIT [1980] 123 ITR 669/[1979] 2 Taxman 22 (Guj.) (para 5.2) followed.
K.M. Parikh for the Appellant. Manish J. Shah for the Respondent.
ORDER
Akil Kureshi, J. - Revenue is in appeal against the judgment of the Income-tax Appellate Tribunal, Ahmedabad ("Tribunal" for short) dated 30th December 2011, raising following question for our consideration.
| I. | "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance made of Rs. 5,99,23,697/- being amount of deduction claimed u/s. 36(1)(iii) of the I. T. Act in respect of money borrowed and expended prior to the commencement of business ignoring the fact that proviso added to Section 36(1)(iii) of the I. T. Act was only classificatory in nature and was applicable to all pending proceedings ?" | |
| II. | "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance of the claim of deduction on account of restructuring of term loan amounting to Rs. 1,47,01,785/- as the restructuring has resulted into enduring benefit, it has to be spread over a period of several years and not following the ratio of the Hon'ble Supreme Court's in the case of Madras Industrial Investment Corporation Ltd. v. CIT reported in [1997] 225 ITR 802, which is directly applicable to the facts of the case ?" | |
| III. | "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not deciding the issue on the merits and allowing the expenditure of Rs.74,23,000/-claimed by the assessee u/s.35D of the I. T. Act on the ground that such claim was not disallowed in earlier years and thereby allowing to perpetuate an error on the face of very clear and undisputed provision of law ?" | |
| IV. | "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance made on account of depreciation of Rs.14,91,87,864/- claimed on certain assets since the said transactions are mere a financial arrangements and that the assessee is not engaged in leasing business ? | |
| V. | "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in law in ignoring the fact that the assessee is not the owner of the assets and that the essence of the agreement is drawn for securing depreciation benefits for the lessor ?" |
2. In assessee's own case in Tax Appeal No. 516 of 2012 filed by the Revenue, we have considered Question No. I, in the following manner :-
"6. Question-V pertains to deduction claimed by the assessee under Section 36[1](iii) of the Act. The Assessing Officer disallowed claim, upon which ultimately, the Tribunal in the impugned judgment, relying on the decision of the Supreme Court in case of Deputy Commissioner of Income-tax v. Core Health Care Ltd., reported in (2008) 298 ITR 194, ruled in favour of the assessee.
6.1 We may notice that the claim of interest in question was with respect to money borrowed for expansion of business for an existing plant of the assessee-company. Before the authorities, the assessee had contended that there was complete interacting, inter dependence and inter connection between the existing business operations and the new plant being installed. It was pointed out that the Department had allowed such deduction in the earlier years.
6.2 Quite independent of the decision of the Apex Court in case of Core Health Care Ltd. (Supra), we are of the opinion that the Tribunal correctly permitted the deduction. Core Health Care Ltd [supra] does lay down a proposition that irrespective of purpose of borrowing - whether for capital or revenue expenditure, interest on such borrowings is always an allowable deduction under Section 36[1](iii) of the Act. "
2.1 This question is accordingly answered and requires no further consideration.
3. Question No. II, which was raised in case of this very assessee in Tax Appeal No. 516/2012 by the Revenue, has been dealt with by this Court, thus-
"3. With respect to Question [II], we noticed that the assessee had paid premium of Rs. 23.80 lakhs on redemption of debentures. The Tribunal accepted assessee's claim of deduction on such amount. Assessee had contended that such deductions would be available under Section 36 [1](iii) of the Income-tax Act, 1961, or alternatively under Section 37 [1] of the Act. Such premium which was otherwise spread-over a period of 5 years and was amortized over such period, is proportionately claimed in the year under consideration.
3.1 In our view, the Tribunal correctly accepted assessee's version; particularly in view of the decision of the Apex Court in case of Madras Industrial Investment Corporation Limited v. Commissioner of Income Tax reported in 225 ITR 802. Learned counsel for the assessee brought to our notice a decision of this Court dated 1st February 1998 rendered in Income-Tax Application No. 259 of 1998 in case of Commissioner of Income Tax, Gujarat v. Anil Starch Product Limited wherein, it is observed as under :
"4. The question arose for consideration before their Lordship in Supreme Court in Madras Industrial Investments Corporation Limited v. Commission of Income tax 225 ITR 802. it was a case where the appellant company had issued debentures in December 1966, at a discount. The total discount on the issue of Rs. 1.5 crores amounted to Rs.3.00 lakh. For the assessment year 1968-69, the company wrote off Rs.12,500 out of the total discount of Rs.3 lakhs being the proportionate amount of discount for the period of six months ending with June 30, 1967, taking into account the period of 12 years which was the period of redemption and dividing the amount of Rs. 3 lakhs over the period of 12 years. The Income-tax Officer disallowed the claim but the appellate Assistant Commissioner allowed the deduction of Rs. 12,500. The Tribunal held that the entire expenditure of Rs.3,00,000 was allowable as expenditure for the year of issue incurred for the purpose of business. On a reference, the High Court noted that out of the total discount of Rs.3,00,000 an amount of Rs.12,500 had been allowed which the Department had not challenged. Hence, the High Court was concerned only with the balance amount of Rs.2,87,500 which the High Court held, could not be considered as expenditure. On appeal appeal to the Supreme Court, the Supreme Court held that the liability to pay the discounted amount over and above the amount received for the debentures was a liability incurred by the company for the purposes of business in order to generate funds of its business. It was therefore revenue expenditure.
5. Thus, according, to the law laid down by the Supreme Court, where the company undertakes to pay more amount than what it has borrowed, and liability to pay the excess amount undertaken to be paid by the company to fulfil its needs for borrowed money is an allowable expenditure under section 37 of the Income Tax Act. "
3.1 This question, therefore, is not required to be considered.
4. With respect to Question III raised in this Tax Appeal, this Court also had an occasion to deal with the same in case of this very assessee in Tax Appeal No. 516/2012, wherein this Court has observed thus -
"5. Question IV pertains to claim of deduction of the assessee under Section 35D of the Act. In the year under consideration, such claim was made to the extent of Rs. 87.73 lakh. The Assessing Officer restricted it to Rs. 13.50 lakh on the ground that only eligible expenses are allowed to be spread over under Section 35D of the Act and therefore, expenses only to the extent that have nexus to the eligible projects are admissible.
5.1 Tribunal, however, noted that in last seven years, no such disallowances were made. Referring to and relying on the decision in case of Radhasoami Satsang v. CIT 193 ITR 321, the Tribunal directed that such benefit be granted.
5.2 It is an undisputed position that claim under Section 35D of the Act did not arise for consideration for the first time. Since last several years, the Assessing Officer granted such claim on the same consideration. The Tribunal therefore, correctly held that such claim could not have been suddenly disallowed. We may refer to a decision of this Court in case of Saurashtra Cement & Chemical Industries Ltd. v. Commissioner of Income-tax, Gujarat, reported in [(1980) 123 ITR 669], wherein, in the context of successive claim of tax holiday, the Court held that the ITO was not justified in refusing to continue the benefit of such tax holiday granted to the assessee in the earlier years, without disturbing the relief granted for the initial years. We are conscious that the issue is not identical in nature. However, the Income-tax Act recognizes the principle of consistency. In the present case, for as many as seven years, previously the Assessing Officer did not dispute certain claims and therefore, the Tribunal correctly interpreted that the Assessing Officer has sought to reopen the issue."
4.1 We, therefore, in light of these observations are not required to consider this question, which stand answered accordingly.
5. With respect to Questions IV & V, this Court had already dealt with the issues in case of this very assessee in Tax Appeal No. 516/2012, thus -
"7. With respect to questions-VI and VII, we notice that the issues pertain to disallowance of depreciation claimed by the assessee on the ground that transactions of le ase were questioned by the Assessing Officer. The Assessing Officer's stand appears to be that the assessee did not retain its interest in the leased out equipments. The Tribunal reversed the order of the Revenue authorities, making following observation :-
"35. We have heard the rival contentions and perused the facts of the case. As regards reliance on the decision of he Hon'ble Supreme Court in the case of Asea Brown Boveri Ltd. (supra) by the learned DR, the arguments of the learned DR that the assessee had purchased the equipments for the economic life of the plant itself and not more than that. As a matter of fact, it is not a case, as is appearing from different clauses of the lease deed that the equipments leased will be returned back to the lessor after the expiry of the lease. Nothing has been brought to disapprove the said clauses of the lease deed by any of the authorities below or by the learned DR. The learned DR could not prove that in fact the assessee is only a financier and is not interested in the assets and therefore, it cannot be said as full payout lease. Therefore, in the circumstances and facts of the case, the arguments made by the learned DR cannot be accepted and following the rule of consistency, the assessee deserves to be allowed the claim and we direct the AO accordingly to allow the claim of the assessee. The order of the learned CIT(A) is reserved. Thus, Ground No.12 of the assessee's appeal is allowed.
7.1 From the above, we noticed that one of the prime factors which weighed with the Tribunal was the rule of consistency. Learned counsel for the assessee rightly pointed out that such claim did not arise for consideration for the first time, but, is spread over to the entire period between A.Y. 1996-97 to 1999-2000. Such claim was made by the assessee and duly granted by the Assessing Officer. In that view of the matter, in our opinion, the Tribunal committed no error."
6. In the aforementioned background, this Tax Appeal is dismissed.
Esha ST-Penalty not to be imposed if credit reversed by assessee was admissible
ST : When there are decisions taking a view that services for maintenance of windmill are eligible for input service credit, no penalty could be levied even if assessee had reversed such credit and such reversal had attained finality
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[2013] 33 taxmann.com 222 (Ahmedabad - CESTAT)
CESTAT, AHMEDABAD BENCH
BASF India Ltd.
v.
Commissioner of Central Excise, Surat-II*
B.S.V. MURTHY, TECHNICAL MEMBER
ORDER NO. A/10015/WZB/AHD/2012
APPEAL NO. ST/373 OF 2011
APPEAL NO. ST/373 OF 2011
NOVEMBER 30, 2012
Section 80 of the Finance Act, 1994 - Penalty - Not to be imposed in certain cases - Assessee took credit on services used for maintenance of windmill - On Department denying such credit, assessee reversed it - Department sought levy of interest and penalty - Assessee argued that since there were cases in favour of assessee allowing impugned credit, penalty could not be levied - HELD : When there are decisions taking a view that impugned credit is admissible, imposition of penalty is unwarranted - Since assessee did not contest disallowance of credit, amount already reversed cannot be refunded as matter had attained finality - However, such credit itself does not become inadmissible merely because asseseee has reversed credit - Therefore, penalty was to be set aside - But, interest was leviable in view of assessee's consent to it as amount of interest payable was small [Para 4] [In favour of assessee]
EDITOR'S NOTE
Penalty proceedings are different from adjudication proceedings.
Thus, even if adjudication had become final against assessee, assessee could raise new grounds to avoid penalty against him.
CASES REFERRED TO
Maharashtra Seamless Ltd. v. CCE [2012] 34 STT 493/18 taxmann.com 112 (Mum - Cestat) (para 3) and Endurance Technologies (P.) Ltd. v. CCE [Order Nos. A/286/287/2011/SMB/C-IV, dated 13-7-2011] (para 3).
Jigar Shah for the Appellant. P.N. Sarvaiya for the Respondent.
ORDER
1. The facts of the case in brief are that during the course of audit of the assessee, it was noticed that the assessee had taken cenvat credit of Rs. 93,195 /- during the period from September, 2006 to May, 2007 on ineligible input services. When it was pointed out, the appellant/assessee reversed the credit taken, but did not pay any interest. Proceedings were initiated to recover the cenvat credit wrongly availed along with interest and proposing penalty. The Adjudicating Authority confirmed the denial of wrongly availed credit and appropriated the amount paid by the assessee. However, proposal for demand of interest and imposition of penalty was dropped by the Original Adjudicating Authority.
2. The department filed an appeal before the Commissioner (A) who in the impugned order has confirmed the demand for interest and also imposed penalty equal to the amount demanded under Sec. 78 of the Finance Act, 1994 read with Sec.11AC of the Central Excise Act, 1994 and Rule 15 of the Cenvat Credit Rule, 2004.
3. The ld. Counsel on behalf of the appellant submitted that the credit taken was for maintenance of windmill and in the following decisions it has been held that such credit is admissible:
In the case of Maharashtra Seamless Ltd. v. CCE [2012] 34 STT 493/18 taxmann.com 112 (Mum.-Cestat)
In the case of Endurance Technologies (P.) Ltd. v. CCE [Order Nos. A/286-287/2011/SMB/C-IV, dated 13-7-2011]
4. When there are decisions taking a view that such credit is admissible, imposition of penalty is unwarranted. I find myself in agreement with the learned Counsel. In this case the appellant did not contest the view taken by the Revenue that credit was inadmissible and therefore the amount already reversed by them cannot be refunded when the matter has attained finality. At the same time credit itself does not become inadmissible just because the appellant has reversed the credit. Therefore penalty is set aside. The ld. AR even though presented very detailed argument as to why the interest is not payable when the credit itself was not utilized, it was proposed that instead of going into discussion of several cases and decisions to consider the issue, since the amount is very small, the appellant may not contest the issue. The ld. Advocate agreed. Accordingly the demand for interest is upheld in view of the consent given by ld. Advocate to make the payment as the amount of interest payable is small.
5. In view of the above discussion, demand for interest is upheld by consent and penalty is set aside.
Vineet *In favour of assessee.
__._,_.___
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