2011 (11) TMI 552 - AT - Central Excise

Denial of CENVAT Credit - Credit of Service Tax on services rendered by their commission agents - Rule 2(l) of Cenvat Credit Rules, 2004 - Held that - The appellant did not submit any document intimating the department that they are availing credit of Service Tax paid by their dealers on the commission. This shows that the appellant suppressed the vital information and mis-declared the fact with intent to evade duty of excise by way of fraudulently availing inadmissible Cenvat credit. I, therefore, uphold the penalty imposed upon the appellant under Section 11AC of Central Excise Act, 1944 - Decided in favour of assessee.

Summary

Issues:
1. Eligibility of Cenvat credit for Service Tax paid by commission agents.
2. Inclusion of value of services in the transaction value of goods for admissibility of credit.
3. Allegations of suppression of vital information and fraudulent availment of inadmissible Cenvat credit.
4. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
5. Option to pay reduced penalty of 25% of duty within thirty days.

Analysis:

Issue 1: Eligibility of Cenvat credit for Service Tax paid by commission agents
The appellant availed Cenvat credit of Service Tax paid by commission agents, claiming it as input service. However, the Revenue contended that the appellant was not eligible for such credit as the services were not classified as input services under Rule 2(l) of Cenvat Credit Rules, 2004. The Tribunal noted conflicting decisions and emphasized that the value of services provided by commission agents must be included in the transaction value of goods for credit admissibility. Citing precedents, it clarified that the basic criterion for credit eligibility is the inclusion of service value in the goods' value for excise duty payment.

Issue 2: Inclusion of value of services for credit admissibility
The Commissioner (Appeals) found that the commission agents were not procuring orders but purchasing goods and selling them to buyers, with discounts not included in the goods' assessable value. As the appellant failed to provide ledgers confirming the nature of transactions, the Commissioner held them ineligible for Cenvat credit. This decision was upheld, emphasizing the importance of including service values in the transaction value for credit eligibility.

Issue 3: Allegations of suppression and fraudulent availment
The Commissioner found that the appellant did not disclose availing credit for Service Tax paid by dealers on commission, indicating suppression of vital information. This led to the imposition of a penalty under Section 11AC of the Central Excise Act, 1944, for fraudulently availing inadmissible Cenvat credit. The Tribunal upheld this penalty, highlighting the seriousness of misdeclaration and evasion of duty.

Issue 4: Imposition of penalty under Section 11AC
The Tribunal agreed with the Commissioner's findings and upheld the penalty imposed on the appellant under Section 11AC of the Central Excise Act, 1944. The penalty was justified due to the appellant's failure to disclose crucial information and the intent to evade excise duty through fraudulent Cenvat credit availment.

Issue 5: Option to pay reduced penalty
The Tribunal referred to judgments allowing a reduced penalty of 25% of duty if paid within thirty days, citing relevant cases. It endorsed the Commissioner's decision to offer this option, emphasizing the need for timely payment of duty, interest, and reduced penalty. The Tribunal found no flaw in the Commissioner's order and upheld the rejection of the appeal.

In conclusion, the Tribunal upheld the Order-in-Appeal, rejecting the appeal and emphasizing the importance of adhering to Cenvat credit rules, including the inclusion of service values in goods' transaction value for credit eligibility. The penalty under Section 11AC was justified due to the appellant's non-disclosure and fraudulent practices, while the option for a reduced penalty highlighted the significance of timely compliance with tax obligations.