Tribunal can't order pre-deposit of both duty as well as penalty at a time
Tribunal can't order pre-deposit of both duty as well as penalty at a time as pre-deposit of penalty arises only when penalty order alone is under challenge
Spandana Spoorthy Financial Ltd. Vs. Commissioner of Customs, Central Excise & Service Tax, Hyderabad-IV [(2014) 49 taxmann.com 419 (Andhra Pradesh)]
Spandana Spoorthy Financial Ltd. ("the Petitioner") filed a writ petition against the order of the Hon'ble CESTAT, Hyderabad, dated July 10, 2013 by which the Hon'ble Tribunal has directed the Petitioner to make pre-deposit of the basic tax component as well as 50% of the penalty under Section 78 of the Finance Act, 1994 ("the Finance Act")
and discrepancy of Rs. 12 Lakhs between the Petitioner's own assessment of tax liability and the Adjudicating Authority's determination.
The Petitioner contended that when the appeal is admitted for hearing and the order of the assessment is under scrutiny, unless the order of assessment reaches its finality, the question of initiation of penalty proceedings does not arise at all.
The Hon'ble High Court of Andhra Pradesh analyzed Section 35F of the Central Excise Act, 1944 ("the Excise Act") which is applicable to Service tax provisions also vide Section 83 of the Finance Act and held that in view of the expression 'duty demanded or penalty levied' in Section 35F of the Excise Act (i.e., use of word 'or'), the Tribunal cannot ask to make pre-deposit of both at a time. Pre-deposit of penalty is required when order of penalty alone is under challenge. If there is a composite order providing for duty/ tax and penalty, direction for pre-deposit of any portion of penalty would result in injustice as well as hardship. Hence, pre-deposit of penalty was set aside.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
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Cenvat credit is available on capital goods used for manufacture of exempted intermediary products which are used in turn for manufacturing of dutiable final product
Cenvat credit is available on capital goods used for manufacture of exempted intermediary products which are used in turn for manufacturing of dutiable final product
CCE, Noida Vs. Samsung India Electronic Ltd. and Others [2014-TIOL-1 708-HC-ALLCX]
Samsung Electronics India Information and Telecommunication Ltd. ("SEIITL") was a public limited company which was amalgamated with Samsung Electronics India Ltd. ("the Respondent") with effect from April 1, 2003 by the order of the Delhi High Court dated May 7, 2003. Prior to amalgamation, SEIITL was engaged in the manufacture of colour monitors and CTV chassis on job work basis for the Respondent. For the execution of such job work, SEIITL had purchased 10 numbers of Auto Insertion Machineries ("capital goods") from the Respondent and availed Cenvat credit on the same.
The Department denied Cenvat credit to the Respondent as availed wrongly in contravention of erstwhile Cenvat Credit Rules, 2001 ("Credit Rules") .The Respondent filed an appeal before the Hon'ble CESTAT, New Delhi who allowed the appeal and held that the Respondent was eligible to avail Cenvat credit.
Being aggrieved, the Department filed an appeal before the Hon'ble High Court of Allahabad contending that since the capital goods were exclusively used for job work purpose i.e. goods manufactured by SEIITL were exempted goods, Cenvat credit cannot be allowed.
The Hon'ble High Court of Allahabad noted that the Central Board of Excise & Customs issued a Circular No. 665/56/2002-CX, dated September 25, 2002, which indicated that Cenvat credit cannot be denied on capital goods used in the manufacture of intermediate products exempt from payment of duty, which are used captively in the manufacture of finished goods chargeable to duty.
In the instant case, SEIITL only manufactured the chassis, which is only a part of a TV. It is not a finished product and is only an intermediary product. SEIITL supplied intermediary product to the Respondent, which manufactured the TV and paid duty on it. Consequently, it was entitled to avail Cenvat Credit in order to prevent the cascading effect, if duty was levied. Accordingly, the appeal filed by the Revenue was dismissed.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)
- See more at: http://taxguru.in/excise-duty/cenvat-credit-capital-goods-manufacture-exempted-intermediary-products-turn-manufacturing-dutiable-final-product.html#sthash.WLJN6qdP.dpuf
No penalty for mere reason that claims made under bonafide belief are found unsustainable in law
Apurva N. Mehta, Advocate
No penalty for concealment or furnishing inaccurate particulars merely for the reason that claims made under bonafide belief are found unsustainable in law – Gujarat VAT Tribunal
The Gujarat Value Added Tax Tribunal in the case of Star Industries v/s The State of Gujarat (Second Appeal No. 347 of 2013 decided on 02.09.2014) has, in the context of penalty u/s 45(2)(c) of the Gujarat Sales Tax Act, 1969, held that where only under bonafide belief the appellant had failed to pay purchase tax u/s 15B on the transactions of branch transfer, it cannot be said that the appellant has concealed the particulars or deliberately furnished inaccurate particulars of any transaction liable to tax as the transactions were duly recorded in the books of accounts and the same were duly reflected in the returns filed by the appellant and nothing contained therein was found to be incorrect, erroneous or false. Consequently, the penalty imposed by the ld. assessing authority and partly retained by the ld. appellate authority was completed deleted by the Tribunal holding as under :
" 6. So far as the issue relating to levy of penalty u/s 45 (2) (c) of the Act is concerned, we are of the view that the appellant has not concealed any particulars of no transactions or deliberately furnished inaccurate particulars of any transaction liable to tax. The transactions were duly recorded in the books of accounts and the same were duly reflected in the returns filed by the appellant. Because of the bonafide belief of the appellant, the appellant has not paid purchase tax u/s 15B on the transaction of branch transfer. However, as soon as this fact was brought to the notice of the appellant, the tax was immediately paid along with the interest. The appellant has neither agitated this issue in the assessment nor in the appeal proceedings. Despite this fact the assessing officer has levied penalty at 150% of the tax u/s 45 (2) (c) of the Act which was reduced by the learned Deputy Commissioner by 50% of the tax. This is also not justified in view of the settled legal position. In the case of Commissioner of Income-tax vs Reliance Petroproducts Pvt. Ltd. (supra) it is held by the Hon 'ble Apex Court that where there is no findings that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty u/s 271 (1) (c) of the Income-tax Act, 1961. A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. In the case of Shree Krishna Electricals vs State of Tamil Nadu (Supra) it is held by the Hon 'ble Supreme Court that since the items were found incorporated in the appellant's account books though it had not included them in its turnover, penalty could not be imposed merely because the exemption claimed by the appellant was disallowed. In the case of Hindustan Steel Ltd. vs the State of Orissa (Supra) it is held that the penalty will not be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of provisions of the Act or where the breach flow from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. In the case of Banu Hasim vs State of Gujarat (Supra), the Hon 'ble Gujarat High court has held that the appellant was litigating under the bonafide belief that the goods exported were exempted from payment of sales tax and for the first time, the goods become taxable after the decision of Hon 'ble Apex court in the case of Yasha Overseas vs Commissioner of Sales Tax and others (2008) 8 SCC 681 and thereafter the appellant deposited the tax, interest and penalty. It was, therefore, held that the penalty could not have been imposed on the appellant and that there was no intention of the appellant to evade the payment of sales tax. The penalty imposed by the authorities was therefore held as not justified and hence the amount of penalty paid was liable to be refunded to the appellant. In the case of Amulakh & Company vs State of Guiarat (Supra), the Hon 'ble Gujarat High court has held that in the absence mens rea, to evade payment of sales tax, all the authorities below were not justified in levying penalty.
7. In view of the above decisions, as well as the facts of the case, we hold that the learned Deputy Commissioner is not justified in retaining penalty of 50 % levied u/s 45 (2) (c) of the Act. The entire penalty is required to be deleted and it is accordingly deleted. "
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ALLAHABAD , OCT 13, 2014: THE assessee is engaged in the manufacture of cosmetic preparations and availed CENVAT credit of duty paid on the inputs and capital goods used by them in relation to the manufacture of their final products. According to the department, since the assessee wrongly availed CENVAT credit, a show cause notice was issued demanding customs duty amounting to Rs.1 ,76,04,762 /-. The assesse filed an application under Section 127B of the Customs Act, 1962 before the Customs and Central Excise Settlement Commission praying for the settlement of the dispute. The Commission, by its order dated 28th May, 2002, directed the assessee to pay the Countervailing Duty, which liability was paid by the assessee . The Commission in its order settled the matter on the following terms:-
"(i) The correct duty liability of the first application is Rs.1 ,62,06,346 /- as accepted by them in their application. This liability has now been fully paid. The correct liability of the second applicant is Rs.1 ,25,62,941 /- as accepted by them in their application. This liability has also been fully paid. The duty liability includes the additional duty of Customs ( CVD ) payable on the goods of the applicant. In respect of the amount representing the CVD , the DRI shall issue a certificate in proof of payment thereof so as to enable the applicant to claim the benefit of MODVAT credit in accordance with law."
From a perusal of the aforesaid, it is clear that the Commission directed that in respect of the Countervailing duty paid by the assessee , the Directorate of Revenue Intelligence ( DRI ) would issue a certificate of proof of payment made by the assessee , so as to enable the assessee to claim the benefit of MODVAT credit in accordance with law. Pursuant to the order of the Commission, the Countervailing duty was paid by the assessee in August, 2002 and a certificate was obtained from the DRI on 6th August, 2002. The certificate indicated proof of payment of customs duty including Countervailing duty by the assessee . Pursuant to the certificate, the assessee wrote a letter dated 23rd August, 2002 to the Commissioner of Central Excise, Noida indicating that the assessee would be availing credit of additional Countervailing duty paid by them on the basis of the certificate issued by the DRI. A reminder was written on 3rd October, 2002. Since the assesse did not hear anything from the department, the assessee took the necessary CENVAT credit.
In this background, the department issued a show cause notice dated 1st October, 2003 asking the assessee to show cause as to why credit of additional Counterveiling duty that was taken by the assessee should not be denied. The notice also indicated that penalty would also be imposed on the Managing Director and the Authorized Signatory of the assessee. The assessee submitted a reply to the show cause notice, which was not accepted. The Commissioner of Customs and Central Excise passed an order in original dated 26th December, 2003 confirming the entire duty and imposed penalty of an equivalent amount. Being aggrieved, the assessee preferred an appeal before the Customs Excise and Service Tax Appellate Tribunal, which was allowed and the order in original was set aside.
The department, being aggrieved, has filed the present appeal in the High Court.
The counsel for the department contended that the certificate issued by the Directorate of Revenue Intelligence ( DRI ) cannot be taken into consideration, inasmuch as the certificate is required to be issued by the Superintendent of Central Excise under Rule 57E (4) of the Central Excise Rules, 1944.
The High Court found the submission of the counsel for the department as patently erroneous. The Settlement Commission in its order has given a categorical finding that as the consequence of their order, the assessees are entitled to a certificate of payment of Counterveiling duty from the Jurisdictional Commissioner or the DRI who are duty bound to issue such certificate. Consequently, the certificates issued by the DRI in consequence of the order of the Settlement Commission is perfectly legal. Further, Rule 57E is not applicable. High Court found that the Countervailing duty was paid by the assessee in August, 2002 and the certificate was issued on 6th August, 2002 by the DRI . The Cenvat Credit Rules, 2002 came into existence with effect from 1st March, 2002 and, consequently, the Cenvat Credit Rules became applicable. High Court was of the opinion that Rule 57E of the Central Excise Rules, 1944 is not applicable in the instant case.
With regard to imposition of penalty for contravening the provision of Rule 57E (3), (4) and (5) of the Central Excise Rules, 1944 and Rule 7(1)(b) of the Cenvat Credit Rules, 2002, the Settlement Commission granted full immunity to the assessee for levy of penalty or fine under the Act in respect of matters covered in the dispute. The contravention done the Ex-Managing Director and the Authorised Signatory was one of the disputes which was settled by the Settlement Commission and, consequently, it was no longer open to the department to issue a show cause notice for levying such penalty.
So, the appeal fails and is dismissed. The question of law is answered against the department and in favour of the assessee.
(See 2014-TIOL-1784-HC-ALL-CX)
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