IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. E/41589/2018
(Arising out of Order-in-Appeal No. 5/2018 ((CTA-II) dated
31.1.2018 passed by the Commissioner of GST & Central Excise
(Appeals – II), Chennai)
M/s. Pepsico India Holdings Pvt. Ltd.
Commissioner of GST & Central Excise Chennai Outer
Ms. Krithika Jaganathan , Advocate for the Appellant
Shri R. Subramaniam, AC (AR) for the Respondent
HON’BLE Ms. Sulekha Beevi C.S., Member (Judicial)
Date of Hearing / Decision: 11.10.2018
Final Order No. 42584 / 2018
Brief facts are that the appellants who are engaged in manufacture of aerated water without containing sugar, aerated water and sweetening beverage etc. were also availing the facility of CENVAT credit of duty paid on inputs, capital goods and service tax paid on input service. During the course of audit and scrutiny of the credit availed, it was noticed that the appellants had availed CENVAT credit of Rs.11,48,094/- vide sl. No. 52 in the CENVAT account register for the month of July 2014 without any supporting documents as prescribed under CENVAT Credit Rules, 2004. The appellants explained that they had paid excess duty utilizing the CENVAT credit for the month of July 2012 and November 2012 and on realizing the same had taken suo moto credit of the said amount. The department was of the view that the credit availed is ineligible as such credit was not supported by documents and that the appellants are not entitled to take suo moto credit. Show cause notice was issued raising the above allegations and proposing to recover the wrongly availed credit to the tune of Rs.11,48,094/- along with interest and also proposing to impose penalties. After due process of law, the original authority confirmed the demand, interest and penalties. In appeal, Commissioner (Appeals) upheld the same. Hence this appeal.
2. On behalf of the appellant, ld. counsel Ms. Krithika Jaganathan submitted that the appellant has been regularly discharging the excise duty at applicable rates and also filing returns for the same. During the months of July 2012 and November 2012, the appellant inadvertently mentioned higher amount of Rs.11,84,033/- as CENVAT credit utilizing for paying excise duty and disclosing in their ER-1 returns, though they had adjusted only lesser amount for payment of duty. She explained the calculation / error as given in the Table below:
2.1 That only during internal verification done in July 2014, the mistake came to light and the appellant then took recredit of the excess CENVAT credit shown to have been utilized by the appellant incorrectly. The amounts were not actually utilized against payment of excise duty and the entry of adjustment / debit was only an error made in the book entry. The recredit so taken by the appellant was declared in ER-1 returns filed for July 2014. The appellant also informed such recredit at the time of audit investigation. The department alleges that the appellant ought not to have taken suo moto credit and ought to have filed a refund claim for the excess duty paid. She submitted that the appellant had availed the recredit only because the credit had been not utilized for any duty liability and was eligible for the same. She submitted that the authorities below had relied upon the decision of the Larger Bench of the Tribunal in the case of BDH Industries Ltd. Vs. Commissioner of Central Excise – 2008 (229) ELT 364 (Tri. LB). That the said Larger Bench decision was per incuriam as the Hon’ble Karnataka High Court by an earlier decision in the case of Motorola India Pvt. Ltd. – 2006 (206) ELT 90 (Kar.) had already held that the mistake in excess duty by adjusting in CENVAT credit can be corrected by suo moto credit by the assessee. She also relied upon the decision of the jurisdictional High Court in the case of ICMC Corporation Ltd. Vs. Commissioner of Central Excise – 2014 (302) ELT 45 (Mad.) and argued that suo moto credit involves only an account entry reversal and there being no outflow of funds, it is not required to file refund claim.
3. The ld. AR Shri R.Subramaniam supported the findings in the impugned order. He submitted that when the appellants have availed the credit by suo moto recredit, the same is ineligible because, credit is not availed on any supporting documents as prescribed under Rule 9 of the CENVAT Credit Rules, 2004. Further, if any excess duty has been paid, the only remedy available is to file refund claim. The appellant instead of filing refund claim has taken suo moto credit to circumvent the limitation prescribed under Section 11B of the Central Excise Act. He emphasized that there is no procedure for taking suo moto credit under the Act.
4. Heard both sides.
5. From the Table above, it is clear that the appellants had adjusted higher amount from the CENVAT credit amount towards discharging duty liability for the months of July and November 2012. Later, realizing the mistake, they had taken suo moto credit of the excess CENVAT amount debited by them. The department has denied the suo moto credit alleging that there are no proper documents for availing the credit for the second time. I find that this allegation by the department is erroneous for the reason that for the second time, the appellants have taken the credit only because they had made a wrong book entry at the initial stage. This does not amount to availing credit for second time. The Larger Bench of the Tribunal in the case of BDH Industries Ltd. (supra), had held that the assessee cannot take suo moto credit. However, the Hon’ble Karnataka High Court in the case cited supra had earlier held that the mistake of debiting the amount in the CENVAT credit can be corrected by the assessee later. Further, the jurisdictional High court in the case of ICMC Corporation Ltd. (supra) had occasion to analyse the very same and has held as under:-
“13. We do not subscribe to the view expressed by the Revenue. Admittedly, the assessee originally availed the Cenvat credit on Service Tax for discharging its liability. However, for sound reasons, it reversed the credit. Strictly speaking, in this process, there is only an account entry reversal and factually there is no outflow of funds from the assessee to result in filing application under Section 11B of the Central Excise Act, 1944 claiming refund of duty. The contention of the Revenue that even in reversal of the entry there is bound to be an unjust enrichment has no substance or based on any legal principle, since, what is availed off by the assessee is only a credit on the duty paid on the services rendered. Further, the assessee is entitled to take note of as per Rule 6(5) of the Cenvat Credit Rules, 2004. as there is no dispute of the fact that a sum of Rs. 3,21,308/- available as Cenvat credit was in respect of input services, which are given under Rule 6(5) of the Cenvat Credit Rules, 2004. When that being the case, in respect of those services specifically mentioned under Rule 6(5) of the Cenvat Credit Rules, 2004 as it existed during the relevant period viz., 2004-2006 getting the reversal of the entry is in tune with its stand taken, which was accepted by the Tribunal in the earlier round of litigation.”
6. This decision was followed by the Hon’ble High Court of Allahabad in Krishnav Engineering Ltd. – 2016 (331) ELT 391 (All.). Following the said decisions of the Hon’ble High Courts, I am of the view that the allegations in the show cause notice cannot sustain. The impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Dictated and pronounced in open court)
(Sulekha Beevi C.S.)