2012 (8) TMI 596 - AT - Central Excise

Input services - Cenvat Credit Scheme was amended by new Cenvat Credit Rules, 2004, effective from 10-9-2004 by which they were allowed to take Cenvat credit of Service tax paid on input services Held that -Asse ssee had taken insurance of their plant and machinery and paid service tax on such insurance against bills dated prior to 10-9-2004 - credit is taken contrary to provisions in Rule 9(1)(f) of Cenvat Credit Rules, 2004 - assessee has taken proportionate credit by adopting their own interpretation without intimation to department would justify to consider this as a case of mis-representation and suppression to invoke extended period for demanding the excess credit availed and utilized

Issues:
Interpretation of Rule 9(1)(f) of Cenvat Credit Rules, 2004 regarding the eligibility to take credit based on the date of the invoice.
Validity of taking credit for service tax paid on insurance for plant and machinery against invoices dated prior to 10-9-2004.
Applicability of the extended period for raising a demand in case of suppression of information detected during an audit.
Imposition of penalty under Rule 15 of Cenvat Credit Rules and Section 11AC without providing the option to pay 25% of the duty evaded within 30 days.

Analysis:

1. Interpretation of Rule 9(1)(f) of Cenvat Credit Rules:
The appellants, as manufacturers of excisable goods, claimed Cenvat credit for service tax paid on insurance for plant and machinery against invoices dated before 10-9-2004. The Revenue contended that Rule 9(1)(f) allows credit only for invoices issued after 10-9-2004. The Tribunal upheld this view, emphasizing adherence to the express provisions of the rule without deviating. The Tribunal rejected the appellant's argument that their interpretation was legitimate, as the rule was clear and simple, justifying the invocation of the extended period for demanding excess credit.

2. Validity of taking credit for pre-10-9-2004 invoices:
The appellants argued that insurance for plant and machinery is typically annual and claimed credit only for the period post-10-9-2004. They contended that denying credit for the pre-10-9-2004 period was unjustified. However, the Tribunal ruled that the rule explicitly required invoices post-10-9-2004 for credit eligibility, rejecting the appellant's claim for legitimate credit due to them.

3. Applicability of extended period for suppression detected during audit:
The Revenue argued that the appellant's actions constituted suppression of information, justifying the invocation of the extended period for raising the demand. The Tribunal agreed, stating that the issue of suppression must be assessed based on the facts of each case. The failure to inform the department of the distorted interpretation leading to the wrong credit during audit was deemed as misrepresentation, allowing the extended period for demanding the excess credit.

4. Imposition of penalty under Rule 15 and Section 11AC:
Regarding the penalty, the Tribunal noted that Rule 15 of Cenvat Credit Rules does not mandate a penalty equal to the wrong credit taken. Additionally, under Section 11AC, the appellant should have been given the option to pay 25% of the duty evaded as penalty within 30 days for final closure. Since this option was not provided, the Tribunal granted the appellant 30 days to pay the duty demanded, interest, and 25% of the duty amount as penalty for final closure, failing which the penalty would revert to the amount equal to the wrong credit taken.

In conclusion, the Tribunal rejected the appeal except for reducing the penalty as per the terms outlined above.

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