2014 (2) TMI 353 - AT - Central Excise

Denial of input service credit - Outward courier charges and interior decoration - Imposition of penalty under Section 11AC - Excess availment of abatement as per the Notification 14/2008-CE (NT) dated 01.03.2008 - Eligibility of benefit under Rule 2 (l) of CCR read with Section 11AC of Central Excise Act, 1944 - Held that - show-cause notice alleged against the appellant that they have availed the abatement wrongly. The word wrongly means that there was no deliberate Act by the appellant. The appellant is not contesting duty liability which has been confirmed by invoking extended period of limitation - appellant is entitled to not to impose penalty in the absence of any fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. Therefore, in the absence of clear-cut violation of the provisions of Section 11AC of the Act, penalty on the appellant is not imposable. Commissioner (Appeals) in his order herself has incorporated that the services has been availed by the appellant in regard to their office at Wagle Estate where the factory of the appellant is located - Decided in favour of assessee.

Summary

Issues:
- Duty demand due to denial of input service credit on outward courier charges and interior decoration charges
- Imposition of penalty under Section 11AC for excess availment of abatement
- Contesting the penalty imposed under Section 11AC
- Contesting the denial of CENVAT credit on outward courier charges and interior decoration charges

Analysis:

Issue 1: Duty Demand on Input Service Credit
The appellant, a manufacturer of Anti-freezing coolants, was found availing excess abatement of 2% during a specific period. The department observed this during an audit and issued a show-cause notice for the duty demand along with interest. The appellant paid the differential duty and interest but contested the denial of CENVAT credit on outward courier charges and interior decoration charges. The appellant argued that there was no willful suppression of fact on their part. The Tribunal found that the appellant had not deliberately acted wrongly, and as there was no clear violation of Section 11AC of the Act, the penalty on the appellant was deemed not imposable.

Issue 2: Imposition of Penalty under Section 11AC
The appellant contested the penalty imposed under Section 11AC, citing a Supreme Court observation that Section 11AC does not apply to every case of non-payment or short payment of duty. The Tribunal considered the appellant's argument and found that in the absence of fraud, collusion, willful misstatement, or suppression of facts to evade payment of duty, the penalty was not justified. The Tribunal relied on the decision in the case of Rajasthan Spinning & Weaving Mills to support its conclusion.

Issue 3: Contesting Denial of CENVAT Credit
The appellant contested the denial of CENVAT credit on outward courier charges and interior decoration charges. The Revenue argued that the appellant was not entitled to avail CENVAT credit on interior decoration services as it was unclear whether these services were availed at the factory premises. However, the Tribunal noted that the services were indeed availed at the office located within the factory premises, as confirmed by the Commissioner (Appeals). Relying on the decision in the case of Ultra Tech Cement Ltd., the Tribunal allowed the input service credit on outward courier charges and interior decoration services.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty and allowing the input service credit on outward courier charges and interior decoration services.