The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK OTAPL No.8 of 2015 Principal Commissioner of G.S.T. & Central Excise, Bhubaneswar …. Appellant Mr. Choudhury Satyajit Mishra, Senior Standing Counsel M/s. Brahmani River Pellets Limited, Jajpur -versus- …. Respondent
Legal Reasoning
Ms. Pami Rath, Advocate CORAM: THE CHIEF JUSTICE JUSTICE M.S. RAMAN Order No. I. A. No.5 of 2022
Decision
ORDER 09.01.2023 05. 1. Having heard learned counsel for the parties, we are satisfied that the prayer made in this application deserves to be allowed without prejudice to the rights and contentions of the parties. The application is accordingly allowed. 2. Let the necessary amendment be carried out in the writ petition as per the schedule to the application. OTAPL No.8 of 2015 3. The appeal by the Department arises from an order dated 11th June, 2015 of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Eastern Zone Bench, Kolkata disposing of Excise Appeal No.E-877 of 2011 filed by the Respondent-Assessee, i.e., M/s. Brahmani River Pellets Limited (BRPL). Page 1 of 5 4. The two questions urged by the Appellant Department for consideration by this Court read as under: (i) Is the Tribunal correct in granting relief by way of completely waiving the penalty by ignoring the fact that the offence of taking CENVAT Credit irregularly attracts penalty under Rule 15(1) of the CENVAT Credit Rules, 2004? (ii) Is the Tribunal correct in allowing Input Service Credit to M/s. BRPL Jajpur for bringing Iron Ore slurry through pipeline from Barbil Plant to Jajpur Plant, when the services used for transporting such slurry are not entirely of the latter but relates to both the Plants? 5. The facts are that BRPL is engaged in the manufacture of iron oxide pellets falling under Chapter 26 of the Central Excise Tariff Act, 1985 (CET Act). A Show-Cause Notice (SCN) dated 1st December, 2010 was issued to BRPL by the Department alleging that they had irregularly availed CENVAT Credit to the tune of Rs.5,61,96,857/- at their Jajpur Plant during November, 2009 to August, 2010 on Inputs, Capital Goods and Input Services received and used in their beneficiation plant at Barbil. It was alleged that since the Barbil factory was situated 221 km away from the Jajpur plant, CENVAT Credit was not admissible at the factory at Jajpur. Further, since the inputs, i.e., the Capital Goods and Input Services were used at Barbil in the beneficiation plant in relation to the manufacture of Iron Ore concentrate, which was exempted under a separate notification dated 1st March 2006, BRPL was not eligible for CENVAT Credit under Rule 6(1) and Rule 6(4) of the CENVAT Credit Rules, 2004 (CENVAT Credit Rules). In the SCN, the Department also proposed invoking Rule 15 (1) of the CENVAT Credit Rules pertaining to penalty. Page 2 of 5 6. In the adjudication order dated 30th June 2011, the CENVAT Credit to the above extent was disallowed. Further, a penalty of Rs.2 crores under Rule 15(1) of the CENVAT Credit Rules was imposed. 7. BRPL then went in appeal to the CESTAT, which by the impugned order dated 11th June, 2015 held as under: “5.xxx xxx xxx (i) CENVAT Credit would be admissible on the input service, if any, used in bringing the input viz., Iron Ore Concentrate in slurry form through pipeline from Barbil Plant to Jajpur Plant during the said period. The adjudicating authority is to ascertain the quantum of CENVAT Credit involved on the procurement of the input and allow the same; (ii) The new plea of the Appellant before the Ld. CESTAT that they had only availed the CENVAT Credit in their Books of Account at Jajpur Plant, without commencing the manufacture of iron ore concentrate at Barbil Plant and now they are eligible to avail CENVAT credit at their Barbil Plant on the inputs, capital goods and input services used there in iron ore or in relation the concentrate, needs department independently, if such claim is filed by the Appellant; to be verified/scrutinized by to manufacture of dutiable (iii) No penalty is imposable for availing CENVAT credit at Jajpur Plant during the period from November, 2009 to August, 2010.” 8. This Court has heard the submissions of Mr. Choudhury Satyajit Mishra, learned Senior Standing Counsel for the Department and Ms. Pami Rath, learned counsel appearing for BRPL, the Respondent-Assessee. 9. On the second question regarding wrongful availing of CENVAT Credit, it is seen that the CESTAT has ordered that ‘the new plea’ Page 3 of 5 of BRPL that they had only availed CENVAT Credit in the Books of Account at Jajpur requires to be verified/scrutinized by the Department “independently, if such claim is filed by the Appellant”. The Court is informed that since the Department had filed the present appeal more than seven years ago, it has still not undertaken the exercise of verification of the Books of Account of BRPL to ascertain in fact if it had availed CENVAT Credit at Jajpur without commencing manufacture of Iron Ore concentrate at Barbil. 10. Without that exercise being completed, it will not be possible for the Department to ascertain if CENVAT Credit was wrongly claimed. This is one of the essential conditions for attracting the penalty under Rule 15(1) of the CENVAT Credit Rules. 11. Consequently, the answer to question (i) viz., whether penalty under Rule 15(1) of the CENVAT Credit Rules would stand attracted automatically would hinge upon the finding of wrongful availment of CENVAT Credit. The question therefore at this stage would be premature. 12. It may be added that it is the contention of the Assessee that there is some element of discretion available in the adjudicating officer to levy penalty under Rule 15(1) of the CENVAT Credit Rules. The Court notes at this stage that there is a distinction between the Rule 15(1) and Rule 15(2) of the CENVAT Credit Rules. As far as Rule 15(2) is concerned, the penalty is attracted in the event of there being misinformation, suppression of facts or fraud by the Assessee. Rule 15 (2) is admittedly not attracted in the present case. Page 4 of 5 13. Rule 15 (1), on the other hand, indicates that the penalty thereunder stands attracted upon wrongful availment of CENVAT Credit without anything more having to be shown by the Department. In that sense, Rule 15(1) is like a ‘no fault liability’ clause where penalty stands automatically attracted. The only element of discretion is regarding the amount of penalty, which should not exceed the duty or service tax on the goods or services, as the case may be, or Rs.2,000/-, whichever is greater. 14. As regards question (ii) the Court is of the view that the conclusion reached by the CESTAT in that regard is a plausible one and calls for not interference. Consequently, the conclusion that no penalty is imposable on BRPL for availing CENVAT credit at Jajpur Plant during the period from November, 2009 to August, 2010 also calls for no interference. 15. Consequently, the Court declines to frame either of the questions as urged. The appeal is disposed of. Chief Justice (Dr. S. Muralidhar) Judge M. Panda (M.S. Raman) Page 5 of 5