2013 (3) TMI 4 - AT - Central Excise

Cenvat credit of the service tax paid on the commission to the commission agents denied - Held that - As decided in Cadila Healthcare Ltd. 2013 (1) TMI 304 - GUJARAT HIGH COURT service tax is ineligible for availment of cenvat credit on this issue, thus appeal to that extent is rejected - against assessee. Equivalent amount of penalties under Rule 15 of the CCR, 2004 read with provisions of Section 11AC of the Central Excise Act, 1944 - Held that - Finding strong force in the contentions raised by the appellant that during the relevant period, there were decisions which indicated that service tax paid on the commission to the commission agents is eligible for availment of cenvat credit and accordingly appellant availed the cenvat credit. It is also undisputed that the appellant is a manufacturer and was filing regular monthly ARE-1 returns to the authorities and indicating therein availment of such cenvat credit. Thus the action of the appellant in taking the cenvat credit of the service tax to the commission agents could be out of bonafide belief as to eligibility to cenvat credit as it is in relation to the business of manufacturing and selling - the said bonafide belief of the appellant cannot be considered as erroneous and that too, to invoke the extended period of limitation for imposition of equivalent amount of penalty, thus setting aside the penalties imposed by the lower authorities - in favour of assessee.

Summary

Issues involved:
Appeal against order extending partial payment of penalty under Section 11AC, denial of cenvat credit on service tax paid to commission agents, imposition of penalty under Cenvat Credit Rules.

Analysis:
1. The department filed an appeal seeking enhancement of penalty by 100% against the order extending partial payment of penalty under Section 11AC. The appellant's appeal was filed to set aside the order denying cenvat credit on service tax paid to commission agents. Another appeal was filed by the assessee against the appeal filed by the Revenue.

2. Despite the appellant's absence, the Tribunal proceeded with the appeal. The appellant had availed cenvat credit on service tax paid to commission agents, which was objected to by the audit party. The adjudicating authority confirmed the reversal of the cenvat credit, imposed interest, and penalty under the Cenvat Credit Rules and Section 11AC of the Central Excise Act. The first appellate authority upheld the decision but reduced the penalty by 25% if paid within 30 days.

3. The appellant contended that cenvat credit was eligible based on previous Tribunal decisions and argued against the penalty imposition, stating they had filed returns indicating the credit without objection until the audit party's view differed.

4. The Assistant Commissioner argued that a High Court judgment held the service tax on commission paid to agents was not eligible for cenvat credit. The department sought a penalty enhancement due to the appellant's non-disclosure of availed cenvat credit.

5. The Tribunal found the High Court's judgment settled the eligibility issue, denying cenvat credit for service tax on commission to agents. The appellant's appeal on this ground was rejected. The appellant was held liable for paying interest on the credit utilized.

6. Regarding the penalty, both lower authorities imposed penalties under the Cenvat Credit Rules and Section 11AC. The Tribunal considered the appellant's bonafide belief in availing the credit, given the previous decisions and regular filing of returns. The penalties were set aside, considering the appellant's genuine belief in the credit's eligibility related to their manufacturing business.

7. The Tribunal disposed of the appeals by partially allowing the assessee's appeal, rejecting the department's appeal, and addressing the cross objection filed by the assessee. The penalties imposed were set aside based on the appellant's bonafide belief in availing the cenvat credit.

This judgment clarifies the eligibility of cenvat credit on service tax paid to commission agents, the imposition of penalties under the Cenvat Credit Rules, and the Tribunal's consideration of the appellant's bonafide belief in availing the credit.