By TIOL News Service

MUMBAI, JAN 20, 2014: THE appellant is a manufacturer of Anti-freezing coolants (Heading 3820) which is subject to valuation on MRP basis. The appellant was claiming abatement of 40% as per the Notification 2/2006-CE(NT) and paying appropriate duty. On 01.03.2008, vide a superseding Notification 14/08-CE(NT) the abatement on the said product was reduced to 38% but the appellant continued to avail 40% abatement.This notification was again superseded by Notification No. 40/08-CE(NT) dated 24.12.2008 and the abatement was reduced to 35%. Since this date, the appellant paid the duty after availing the correct abatement of 35%.

Thanks to the Audit conducted by the department, the availment of excess abatement of 2% by the assessee during the period 01.03.2008 to 23.12.2008 came to notice and upon pointing out the same, the appellant paid the differential duty along with interest.

Later, the department issued a demand notice invoking the extended period seeking appropriation of the differential duty & interest paid. The SCN also proposed imposition of equivalent penalty u/s 11AC of the CEA, 1944. Along with this demand, the SCN also incorporated a proposal to deny CENVAT credit availed on outward courier charges and interior decoration charges on the premise that the same does not qualify for the benefit under Rule 2 (l) of CCR, 2004.

The contents of the demand notice were confirmed by the adjudicating authority along with imposition of equivalent penalties.

Since the Commissioner (Appeal) upheld this order, the appellant is before the CESTAT.

The appellant submitted that they are not contesting the duty liability & interest on account of excess availment of abatement but are aggrieved with the penalty imposed u/s 11AC of the CEA, 1944. As regards imposition of penalty imposed u/s 11AC it is submitted that the reduction in the abatement rate was not in their knowledge and moreover there is no willful suppression of fact to invoke the extended period of limitation. Reliance is placed on the decision in Rajasthan Spinning & Weaving Mills - (2009-TIOL-63-SC-CX). It is further submitted that denial of CENVAT credit is also not tenable in view of the decision of the Bombay High Court in the case of Ultra Tech Cement Ltd. - (2010-TIOL-745-HC-MUM).

The Revenue representative submitted that in the matter of excess abatement, since the appellant has not contested the duty liability,imposition of penalty is proper. As regards the CENVAT credit availed, it is submitted that the invoice does not specify whether the outward courier charges and interior decoration service have been availed by the appellant in the factory premises or not.

The Bench observed -

"6. …, I find that the show-cause notice issued to the appellant particularly in para 3 of the show-cause notice alleged against the appellant that they have availed the abatement wrongly. The word wrongly means that there was no deliberate Act by the appellant. The appellant is not contesting duty liability which has been confirmed by invoking extended period of limitation but relying on the decision of Rajasthan Spinning & Weaving Mills (supra) the appellant is entitled to not to impose penalty in the absence of any fraud, collusion or any willful mis-statement 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. Therefore, in the absence of clear-cut violation of the provisions of Section 11AC of the Act, penalty on the appellant is not imposable.

7. Further, the learned Commissioner (Appeals) in his order herself has incorporated that the services has been availed by the appellant in regard to their office at Wagle Estate where the factory of the appellant is located. This fact has not been disputed by the Revenue. Therefore, in the light of the decision in the case of Ultratech Cement Ltd., (supra) I allow the input service credit taken on outward courier charges and interior decoration service."

In fine the appeal was allowed and the Stay application was also disposed of.

(See 2014-TIOL-95-CESTAT-MUM)