MP/15/DEM/2012 dtd. 31.8.

2012
BRIEF FACTS OF CASE:
1.

M/s. Bhumika Strips Pvt. Ltd., situated at Plot No. 255-256,

Gujarat Vepari Mahamandal Audhyogic S.V-Odhav, Ahmedabad (herein after

referred to as the said unit) is engaged in the manufacture of S. S. Cold
Rolled Patta Patti, falling under chapter 72 of Central Excise Tariff Act, 1985
and are holding Central Excise Registration No. AAACB7696JXM001.
2.

During the scrutiny of the ER-1, (Monthly Return) filed by the

assessee on 7th June, 2011, for the month of May, 2011, it was found that
under the head Details of Cenvat Credit taken and utilised the Opening
balance of Rs.8,15,161/- (Cenvat (BED) Rs.7,91,534/-, E.Cess Rs.15,821/-,
SHEC Rs.7806/-) was shown or brought forward

whereas the Closing

balance in Cenvat Credit account shown in the ER-1 filed on 10 th May,2011,

for the month of April, 2011 was Rs.5,88,830/-(Cenvat (BED) Rs.5,71,796/E. Cess Rs.11,426/- SHEC Rs.5,608/-). The said unit, thus wrongly availed
an excess Cenvat credit of

Rs.2,26,331/- (BED Cenvat Rs.-2,19,738/-,

E.Cess Rs.4,395/- SHEC Rs.2,198/-), in their Cenvat Credit Account, as

shown in the ER-1 for the month of May, 2011.
3.

Rule 3 & 4 of Cenvat Credit Rules, 2004, stipulates that only a

manufacturer or producer of final products shall be allowed to take Credit

(hereinafter referred to as the Cenvat Credit) of the duty paid on any input or
capital goods received in the factory of manufacturer of final product
including the said duties, or tax, or cess paid on any input, as the case may
be, immediately on receipt of the inputs in the factory and the Cenvat credit
in respect of capital goods as per the conditions of Rule 4. Further, as per
Rule 9, the Cenvat Credit shall be taken by the manufacturer on the basis

of documents like an invoice issued by a manufacturer for clearance of

inputs or capital goods, an invoice issued by an importer, dealer, depot etc.
4.

Rule 14 of the Cenvat Credit Rules, 2004, stipulates that where

the Cenvat Credit has been taken or utilized wrongly or has been
erroneously refunded, the same along with interest shall be recovered from
the manufacturer or the provider of the output service and the provisions of
Section 11A and 11AB of the Excise Act shall apply for effecting such
recoveries.
5.

Rule 15 of the Cenvat Credit Rules, 2004, stipulates that if any

person, takes or utilises Cenvat Credit in respect of inputs or capital goods,

wrongly or in contravention of any of the provisions of these rules, then, all
such goods shall be liable to confiscation and such person, shall be liable to
a penalty not exceeding the duty on such goods.
6.

The said unit availed an excess Cenvat credit of Rs.2,26,331/-

than the actual credit in balance, in as much as the Closing balance of the
Cenvat credit for the month of April,2011 was Rs.5,88,830/-, whereas, the
unit carried forward Cenvat credit of Rs.8,15,161/- as Opening balance for
the month May,2011. The act on the part of the unit was in contravention
of the provisions of Rule 3 & 4 of Cenvat Credit Rules, 2004. Further, as
required under Rule 9, the Cenvat Credit shall be taken by the
manufacturer on the basis of documents like an invoice issued by a
manufacturer for clearance of inputs or capital goods, or invoice issued by
an importer, dealer, depot etc,. and no such document appears to be in
existence, which has resulted in the contravention of Rule 9 of the Cenvat
Credit Rules, 2004.
7.

Further, on scrutiny of the returns for the succeeding months, it

was found that the unit has wrongly taken excess credit of CENVAT of Rs.-

2,26,331/- (BED Rs.-219738/-, E.Cess Rs.-4395/- SHEC Rs.-2198/-) in the

month of May, 2011 which resulted in wrong/excess utilization of the same
in the following months.
Month
June,2011
July, 2011
Aug.,2011
Sept., 2011
Total

8.

Duty
31,636/5,061/1,81,077/1,944/2,19,718/-

E.Cess
640/101/3,215/146/4102/-

H. E.Cess
426/50/1,453/71/2000/-

Total
32,702/5,212/1,85,745/2161/2,25,820/-

Therefore, the unit, by taking or utilising wrong credit, M/s

Bhumika Strips Pvt. Ltd. Odhav, has contravened the provisions of Rule (3),
(4) and (9) of Cenvat Credit Rules, 2004, in as much as the credit is taken
without any reciprocal payment of duty, what-so-ever on any input or capital
goods etc.; in as much as no receipt of input or capital goods in the factory
of the manufacturer has taken place; in as much as no documents on the
basis of which the credit was taken were in existence,

9.

As per provisions of Rule, 14 of CCR, 2004, the provisions of

Section 11A and 11AB of the Central Excise Act, 1944 shall apply mutatis
mutandis. M/s Bhumika Strips Pvt. Ltd., Odhav have wrongly taken or
utilised CENVAT credit in the ER-1 without any duty paying documents viz.
invoices by contravening the

provisions of CCR, 2004. Therefore, it appears

that, the wrongly taken or utilised CENVAT credit of Rs.- 2,26,331/- (BED
Rs.-219738/-, E.Cess Rs.-4395/- SHEC Rs.-2198/-) is recoverable from
them under Rule 14 of CCR, 2004, read with Section 11A of Central Excise
Act, 1944. M/s Bhumika Strips Pvt. Ltd., Odhav are liable to pay interest as
per provisions of Rule 14 of CCR, 2004, as the case may be, read with
Section 11AB/11AA of the Central Excise Act, 1944. Further, it appears that

M/s. Bhumika Strips Pvt. Ltd, Odhav are liable to penalty under Rule 15 (1)
of CCR, 2004 read with Rule 25 of Central Excise Rules, 2002 for wrongly
taking excess credit without any document as aforesaid and utilizing the
same for payment of dutiable goods.

10.

A show cause notice F.No.AR-II/Bhumika/SCN/12-13 dated

8.5.2012 was issued to M/s. Bhumika Strips Pvt. Ltd., Plot No.255-256,
Gujarat Vepari Mahamandal Audhyogic S.V-Odhav, Ahmedabad, calling
upon before the

Assistant Commissioner of Central

Excise, Div-III,

Ahmedabad II, for showing cause as to why:

(i)

Cenvat credit amounting to Rs.- 2,26,331/- (BED Rs.-219738/-,

E.Cess Rs.-4395/- SHEC Rs.-2198/-) ( Rs.- Two lakhs, Twenty
Six Thousands, Three Hundred and Thirty One only), wrongly
taken or utilised by the assessee should not be recovered from
them under rule 14 of Cenvat Credit Rules, 2004 read with
Section 11A of Central Excise Act, 1944 and since an amount of
Rs.

2,49,736/-

(Cenvat

(BED)

Rs.-2,40,791/-,

E.

Cess

Rs.6,536/- SHEC Rs.-2,409/-), out of Rs.2,54,081/- (Cenvat BED

Rs.-2,45,136/-, E. Cess Rs.-6536/- SHEC Rs.-2409/-) tendered
vide GAR-7 dated 4-10-2011, have been paid the same should not
be appropriated against the said demand;
(ii)

Interest at the appropriate rate should not be charged under

Section 11AB/11AA of Central Excise act, 1944, read with Rule
14 of Cenvat Credit Rules, 2004 and since an amount of Rs.6,668/- have been paid towards interest why the same should
not be adjusted/appropriated against the interest recoverable;

(iii)

Penalty should not be imposed under Rule 15 (1) of the Cenvat

Credit Rules, 2004, read with rule 25 of Central Excise Rules,
2002

PERSONAL HEARING
11.

The personal hearing in the case was fixed on 19.6.2012 at 1230 hrs

and Shri Vijay B Joshi, Advocate, appeared on behalf of the party. Shri
Vijay Joshi, during the hearing

submitted their written submission and

reiterated the facts mentioned therein and requested to decide the case
accordingly.

DEFENCE REPLY
12.

The party filed their reply vide their letter dated 16.6.201, submitted

during the personal hearing against the Show cause notice and stated that
there was a clerical error while showing the opening balance of CENVAT
credit in the ER1 for the month of May,2011. They further stated that on
noticing the error they immediately deposited the amount of Rs.2,49,736/on 4.10.2011. They contended that the payment was made by them much
prior to the issue of the Show cause notice and

only after such payment

made by them the lapse came to the knowledge of the department. They
contended that there was no fraud, collusion or willful misstatement or
suppression of fact or contravention of any Rule with intent to evade payment
of duty.

12.1. The party further denied

of any contravention of Rule 3 or 4 of

CENVAT Credit Rules, 2004, as the case is not related to availment of credit
on any input or capital goods, but, there is a clerical error while carrying
forward the balance of CENVAT credit lying in records. They contended that
they have rectified the said clerical error by making a payment in cash

alongwith interest on 4.10.2011. The party denied the penalty proposed

under Rule 15(1) of Cenvat Credit Rules, 2004 read with Rule 25 Central
Excise Rules, 2002.

12.2. The party further contended that Rule 15 of CCR, 2004 is applicable
only in the case of wrong credit in respect of input or capital goods or input
services and its utilization. They contended that in the present case the
excess credit balance is not taken in respect of any input or capital goods or
input services, but due to clerical error by mistake it was carry forwarded,
and therefore, no penalty can be imposed under Rule 15 of CCR, 2004.

12.3. The party further contended that provisions of Rule 25 is also not
applicable as there is no removal of any excisable goods in contravention of
any Central Excise Rule, or there is no dispute regarding account for any
excisable goods or manufacture of any excisable goods without registration.
They also contended that there is no contravention of any provisions of the
Central Excise Rules, with an intent to evade payment of duty and so penalty
cannot be imposed under Rule 25 of Central Excise Rules, 2002.

12.4

The party pleaded that as the payment alongwith interest of excess

credit taken while carrying forward of balance was made prior to the issue of
the show cause notice, no penalty may be imposed. They also request to
grant consequential relief for refund of excess amount of Rs.23405/- paid
vide challan dated 4.10.2011, as per the notice and after appropriation of the
amount demanded under this notice.

DISCUSSION AND FINDINGS:

13.

I have gone through the case records, facts of the case; submissions

made by the assessee in their letter submitted during the hearing held on
19.6.2012 and contentions made during the hearing. M/s Bhumika Strips
Pvt. Ltd., had filed their ER-1 for the month of May,2011, on 7 th, June,2011,
wherein they have taken the Opening balance of Cenvat Credit taken and
utilized as Rs.815161/-, whereas the Closing balance of Cenvat Credit taken
and utilized for the month of April, 2011, was Rs.5,88,830/- and thereby
availed excess Cenvat Credit of Rs.2,26,331/-, during the month May, 2011.
Further, the party wrongly/excess utilized the CENVAT credit in the following
months succeeding the month of May, 2011. They wrongly/excess utilized
the CENVAT credit of Rs.32702/-; Rs.5212/-; Rs.185745/- and Rs.2161/during the months June,2011; July,2011; Aug.,2011 and Sept.,2011
respectively.

13.1 I find that the party had wrongly availed the CENVAT of Rs.226331/during the month of May, 2011 and in consequent to it availed excess
CENVAT credit during

the month of June, 2011 to Sept, 2011 and in

contravention to the provisions of Rule 3,4, and 9 of the CENVAT Credit

Rules, 2004. The said wrongly availed CENVAT credit is recoverable under
Rule 14 of CENVAT Credit Rules, 2004, and Section 11A and Section 11AA
alongwith interest.
CENVAT

The assessee pleaded that the excess availment of

was due to clerical error

and they on noticing the said error

immediatedly deposited the amount of Rs.249746/- on 4.10.2011. I also find

that the party has paid the interest of Rs.6668/-.
13.2.

As per Rule 3(1) of the CENVAT Credit Rules, 2004:

A manufacturer or producer of final products shall be allowed to take credit of

CENVAT of

(i)

the duty of excise specified in the First Schedule to the Excise Tarif
Act, leviable under the Excise Act;

As per Rule 4 of the CENVAT Credit Rules, 2004:

(1) The CENVAT credit in respect of inputs may be taken immediately on
receipt of the inputs in the factory of the manufacturers;

As per Rule 9 of the CENVAT Credit Rules, 2004:

(1) The CENVAT credit shall be taken by the manufacturer, on the basis of
the documents, namely:
(a) an invoice issued by
(i)

a manufacturer for clearance of

(I)

inputs or capital goods from his factory or depot or

from the premises of the consignment agent of the
said manufacturer or from any other premises from
where the goods are sold by or behalf of the said
manufacturer;

13.3 I find that in the instant case, the party has wrongly taken excess
CENVAT credit of Rs.226331/- by showing a wrong figure of Rs.815161/- as
Opening balance of

CENVAT credit in the month of May,2011,

in their

CENVAT account instead of Rs.588830/-, which was their actual Closing

balance of the CENVAT balance as on April,2011. I also find that the party
has wrongly taken the CENVAT of Rs.226331/- without any support of valid
invoices. On examining the ER1 for the month of September,2011, I find that
the party has paid the duty of Rs.254081/-(Rs.245136/- + 6536 + 2409)
alongwith interest of Rs.6668/- vide GAR-7 dated 4.10.2011.

Out of the

total 254081/- paid towards Basic duty Rs.4345/- is towards the duty paid
for the month of September, 2011, thus the assessee has paid an amount of

Rs.23405/- in excess (Rs.21053/- + 2141/- + 211/-).

The party in their

reply had pleaded for refund of the excess duty paid, I find that the though
the party had paid the excess amount, they can take a recourse of filing
refund. The partys plea that excess availment of CENVAT credit is due to
clerical error while recording the Opening balance of CENVAT credit for the
month of May, 2011, cannot be accepted because they have paid the duty
only in the month of October, 2011, whereas they could have rectified the
said mistake in their next monthly return as the party was filing monthly
returns. However,

it seems that the party did not have any malafide

intention to evade the Central excise duty as facts on records shows

that the party on there own have debited the CENVAT credit wrongly
taken by them.

13.4. I also find that the party by wrongly taking the excess CENVAT credit in
the month of May,2011, had utilized wrongly/ excess CENVAT during the
month of June,2011; July,2011; Aug.,2011 and Sept.,2011.

14. In view of the above facts, I find that the party wrongly/ excess availed
the CENVAT credit in their ER-1 without any support of valid documents,
and thereby they have contravened the provisions of Rule 14 of the CENVAT
credit Rules, 2004. I also find that the said act on the part of the party has
attracted the provisions of Rule 15 of CENVAT credit Rules, 2004,

and the

party is liable for the penalty. I find that the party did not have any malafide
intention to evade payment of duty, but, the fact remains that they had
carried forward wrong balance of CENVAT credit in the month of May, 2011,
which resulted in wrong availment of CENVAT credit. However, since the
party on noticing the error had deposited the amount on 4.10.2011, I take a
lenient view while imposing the penalty.

15. In view of the above, I pass the following order.

ORDER
1. I confirm the demand of Central Excise duty

amounting to

Rs.226331/- from M/s Bhumika Strips Pvt. Ltd., Plot No.255-256,

GVMM, Odhav, Ahmedabad, under Rule 14 of the CENVAT Credit
Rules, 2004, read with proviso to Section 11A(1) of the Central Excise
Act, 1944. However, the said amount of Rs.226331/- is paid by the
party vide GAR-7 challan dated 4.10.2011, I adjust and appropriate
the same against the confirmed demand under Section 11A of the
Central Excise Act, 1944.
2. I impose penalty of Rs.25000/- on M/s M/s Bhumika Strips Pvt. Ltd.,
Plot No.255-256, GVMM, Odhav, Ahmedabad under Rule 15(1) of the
CENVAT Credit rules, 2004.
3. I order the recovery of interest on the confirmed amount at the
prescribed rate under Section 11AA of the Central Excise Act,1944,
from the date of liability to till the payment of duty. The amount of
Rs.6688/- already paid by the party vide GAR-7 dated 4.10.2011
against the interest liability is appropriated.

(Dinesh Singh)
Deputy Commissioner,
Central Excise Div.-III,
Ahmedabad -II.
F. No AR-II/Bhumika/SCN/12-13
By Regd. Post A/D.
To,

Date: 31.8.2012

M/s. Bhumika Strips Pvt. Ltd.,

Plot No.255-256,
Gujarat Vepari Mahamandal Audhyogic S.V
Odhav, Ahmedabad,
Copy to: 1. The Commissioner, Central Excise, Ahmedabad-II.
2. The Superintendent, C. Ex. Range-II, Div-III, Ahmedabad II.
3. Guard file.