2012 (10) TMI 952 - AT - Central Excise

Benefit of cenvat credit - Penalty u/s 11AC - Held that - during the relevant period, there was no restriction for utilisation of such credit without allocating proportionately to various units. The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity and in view of the decisions cited, has to be considered sympathetically. Further, it is also noticed that appellant has not got any extra benefit by doing this - In fact, proper distribution would have enabled them to utilise full credit. It would show that the exercise is totally Revenue neutral and no loss has been caused to the Revenue (infact Revenue has gained). In the absence of any legal requirement to avail credit based on the services received during the relevant time and the procedural irregularity has to be ignored and the demand confirmed has to be set-aside on this ground. Since the credit has been availed which was not eligible and not admissible and which has been availed without knowledge of the department, extended period has been rightly invoked and the demand has been correctly confirmed - Decided partly in favour of assessee.

Summary

Issues:
Admissibility of cenvat credit for services utilized at different manufacturing units, registration as Input Service Distributor, procedural irregularity in credit utilization, demand for wrongly availed cenvat credit, recovery of service tax credit before 10.09.2004, imposition of penalties on the company and employees.

Analysis:

1. Admissibility of Cenvat Credit for Services Utilized at Different Manufacturing Units:
The appellant availed cenvat credit of service tax paid for services at a different manufacturing unit for payment of Central Excise duty at the main unit. The issue arose regarding the distribution of credit by the Head Office instead of utilizing it solely at the Vatva unit. The Tribunal noted that during the relevant period, there was no restriction on utilizing such credit without proportionate allocation to various units. The failure to register as an Input Service Distributor was considered a procedural irregularity. The Tribunal found that no extra benefit was gained by the appellant, and the utilization of credit was revenue-neutral. Consequently, the demand for wrongly availed cenvat credit was set aside.

2. Registration as Input Service Distributor and Procedural Irregularity:
The appellant did not follow the prescribed procedure for credit utilization, relying on Excel sheets. The services were received at one unit but credit was availed at another. The department emphasized the importance of following procedures for easy verification. However, the Tribunal considered the proximity of the registered office and Vatva office, acknowledging the absence of a legal requirement for proportionate credit allocation during the relevant period. The procedural irregularity was viewed sympathetically, especially as no revenue loss occurred.

3. Recovery of Service Tax Credit Before 10.09.2004:
The appellant availed service tax credit before 10.09.2004, which was not eligible. The Tribunal upheld the disallowance of this credit, invoking the extended period due to ineligibility and lack of departmental knowledge. The demand for service tax credit before the specified date was confirmed with interest and penalty.

4. Imposition of Penalties:
Considering the setting aside of the majority of the demands and the minimal remaining amount, the Tribunal deemed no penalties warranted on the employees and the Director. Therefore, the appeals filed by the Director, General Manager, and Authorised Signatory were allowed.

In conclusion, the Tribunal disposed of all appeals based on the above analysis, setting aside the demand for wrongly availed cenvat credit while upholding the recovery of service tax credit before 10.09.2004 and deciding against imposing penalties on the employees and Director.