By TIOL News Service

CHENNAI, FEB 11, 2019: CENVAT credit was denied by the original authority [on 29.2.2016 ] along with imposition of penalty and interest.

The Commissioner(A) dismissed [on 21.9.2016 ] the appeal filed by the assessee on the ground that there was a delay of 121 days in filing the appeal and that the same was beyond the condonable period.

Tribunal, vide common order dated 29.6.2017 , dismissed the appeals on the ground that there is no provision either u/s 35 of the Act or anywhere in the Act to allow the assessee to seek any further time to present an appeal before the CCE(A) or for that matter to the latter to allow any further condonation beyond the period of 90 days.

Appeals were filed before the Madras High Court against the order of the CESTAT.

These too were dismissed by the High Court [on 07.08.2018 ].

We reported this order 2018-TIOL-1834-HC-MAD-CX as -

CX - Whether the appeal of assessee can be dismissed by Tribunal on the only ground that Commissioner (A) is correct in dismissing the appeal of assessee on the ground that Commissioner (A) did not have the power to condone a delay of more than thirty days -A bare reading of Section 35 of CEA, 1944, makes it clear that any person aggrieved by any decision or order passed under the Central Excise Act by a Central Excise Officer, lower in rank than a Principal Commissioner of Central Excise or Commissioner of Central Excise may appeal to Commissioner of Central Excise (A), within sixty days from the date of communication to him of such decision or order - If for any sufficient cause, the assessee was prevented from presenting the appeal within the aforesaid period of 60 days, then the Commissioner (A) shall allow the appeal to be presented within a further period of 90 days - Thus, it could be seen that beyond 90 days, the Commissioner (A) has no bar to condone the delay in filing an appeal to the Commissioner -Though reasons assigned, may appear to be sufficient, statute does not provide condonation beyond the period provided therefor - If the prayer is accepted, then it would be amounting to adding words to the enactment -There is no error in rejecting the appeals filed beyond the statutory period therefor - Substantial questions of law raised are answered against the assessee - Singh Enterprises Vs. CCE, Jamshedpur - 2007-TIOL-231-SC-CX,R.Gowrishankar Vs. CST-I (Appeals), Chennai [W.A.No.589 of 2016 dated 13.6.2016] - 2016-TIOL-1381-HC-MAD-ST relied upon – Appeals dismissed : HC

The assessee has, thereafter, chosen to file Writ Petition(s) challenging the order-in-original dated 29.02.2016 .

Their main contention is that with regard to availment of GTA credit there was a dispute on the legal issue and that there were several judgments and that ultimately, the matter stood settled by the decision of the Hon'ble Supreme Court in the case of CCE Vs. Ultratech Cement Limited - 2018-TIOL-42-SC-CX. Therefore, the question of suppression can never be invoked, as the issue was continuously being litigated for several years.

That invocation of proper Sub-Rule of the said Rule 15 is mandatory in order to impose penalty on a manufacturer or a service provider; that the assessee being a manufacturer, the only applicable Sub-Rule upto 31.3.2010 is Sub-Rule (3) of Rule 15 of the Rules, under which, penalty cannot exceed Rs.2,000/- and that there is no separate provision for cases involving fraud, suppression, etc.; that that for the period upto 31.3.2010, there is no provision to impose equal amount of penalty on a manufacturer for wrongly availing any credit on input services irrespective of the issue as to whether any fraud or suppression is involved or not; that the first respondent clearly exceeded the jurisdiction vested upon him under Rule 15(3) of the Rules as it stood then by imposing equal penalty for the period from 01.3.2008 to 31.3.2010, during which period, he cannot at all impose equal penalty on a manufacturer, who has wrongly availed any credit on input services and that the penalty that could be imposed under Rule 15(3) of the Rules could be only Rs.2,000/-; that with regard to equal amount of penalty imposed for the period from 01.4.2010 to 31.1.2015, in none of of the show cause notices, the first respondent alleged fraud, willful misstatement, collusion or suppression of facts, that the show cause notices are periodical in nature and that there is no case for imposition of equal amount of penalty, since Rule 15(2) of the Rules specifically states that such penalty can be imposed only in cases where fraud, willful misstatement, collusion or suppression of facts with an intention to evade payment of duty is made out.

Reliance was placed on the decisions in Electronic Corporation of India Limited - 2018-TIOL-484-HC-AP-CX-LB and Panoli Intermediate (India) Private Limited - 2015-TIOL-1556-HC-AHM-CX-LB to justify the maintainability of the Writ Petitions.

The Single Judge was discinclined to entertain the Writ Petitions on the ground that in both the decisions relied upon by the assessee, the appeals filed by the assessees therein were only upto the Tribunal and they were dismissed as time barred. However, in the case of the present assessee, the appeals filed before the Division Bench of this Court were dismissed confirming the orders of the First and Second Appellate Authorities and this is a distinguishing feature.

So also, the Division Bench had already dismissed the appeals arising out of the orders passed by the Adjudicating Authority though on the ground of limitation and that, therefore, the assessee was not entitled to file writ petitions as a matter of right, as the jurisdiction vested on this Court under Article 226 of The Constitution of India is, undoubtedly a discretionary one, not necessarily to be exercised even assuming that the assessee has made out a case.

It was further observed that it is not as if the assessee is without any remedy and that it is always open to the assessee to challenge the order passed by the Division Bench before the Supreme Court. For such reasons, the writ petitions were dismissed as not maintainable vide common order dated 26.10.2018 .

Thisorder is now challenged by the assessee before the Division Bench of the High Court.

Insofar as the question as to whether the assessee was entitled to file Writ Petition(s), the High Court observed that the same is proper in view of full Bench decision in Electronic Corporation of India Limited (supra).

The High Court further observed –

"24. In our considered view, the issue, which has been raised by the assessee before us and in the writ petitions, touches upon the jurisdiction of the Adjudicating Authority to impose equal penalty for the period upto 31.3.2010 and whether circumstances warrant imposition of equal penalty post 31.3.2010…The Adjudicating Authority, while issuing the show cause notices, did not indicate as to under which Sub-Rule, he proposes to impose penalty, but merely mentioned Rule 15 of the Rules."

After extracting rule 15of the CCR, 2004 as applicable for the period from 01.3.2008 to 31.3.2010 and w.e.f 01.04.2010, it is also observed –

"28. Rule 15(3) of the Rules, which was in vogue till 31.3.2010, states that if any person takes CENVAT credit in respect of input services wrongly or in contravention of any of the provisions of the Rules in respect of any input service, then, such person shall be liable to a penalty which may extend to an amount not exceeding Rs.2,000/-. After amendment with effect from 01.4.2010, the said Rule contemplates levy of equal penalty where the CENVAT credit in respect of input or capital goods or input services has been taken or utilized wrongly by reason of fraud, collusion, willful misstatement or suppression of facts, etc., with intent to evade payment of service tax.

29. Thus, for the period from 01.4.2010, mens rea requires to be established to impose equal penalty. In our considered view, the issues as to whether equal penalty was imposable or in other words, whether the Adjudicating Authority had jurisdiction to impose equal penalty for the period prior to 31.3.2010 and as to whether facts warranted imposition of equal penalty for the period from 01.4.2010 are definitely issues touching upon the jurisdiction of the Authority to take a decision in the matter. Therefore, we are fully convinced that the assessee has made out a case for interference of the said common Order-in-Original in exercise of the powers under Article 226 of The Constitution of India, as we are prima facie satisfied that the Adjudicating Authority assumed jurisdiction, which has been shown to be not in existence for the period upto 31.3.2010.

30. The second aspect is for the period from 01.4.2010 and the issue would be as to whether the Adjudicating Authority exceeded in his jurisdiction or crossed the limits of jurisdiction or acted in violation of the principles of natural justice in not examining as to whether the conduct of the assessee attracted the provisions of Rule 15(3) of the Rules and as to whether there was any mens rea on the part of the assessee. Thus, the issues raised by the assessee being issues touching upon the jurisdiction of the Authority, we are of the considered view that the writ petitions can be entertained."

Concluding that the issues, although not specifically canvassed by the assessee at the time they submitted their reply to the show cause notices, being issues relating to jurisdiction, the assessee should not be foreclosed from raising such issues so that the first respondent can adjudicate upon such issues, the High Court remanded the matters to the Adjudicating Authority for a fresh decision only in respect of imposition of penalty.

The writ appeals were allowed.

The common Order-in-Original dated 29.2.2016 was set aside insofar as imposition of equal penalty for the periods, both from March 2008 to March 2010 and from 01.4.2010 to 31.1.2015 are concerned.

The matters are remanded to the first respondent/Adjudicating Authority to take a fresh decision.

(See 2019-TIOL-326-HC-MAD-CX)