2015 (12) TMI 1154 - AT - Central Excise

Denial of CENVAT Credit - outdoor catering services - Penalty u/s 11AC - Invocation of extended period of limitation - Held that - As decided by the Hon ble High Court of Bombay in the case of Ultratech Cement Ltd. (2010 (10) TMI 13 - BOMBAY HIGH COURT ) vide order dated 25.10.2010, the appellant is not entitled to take Cenvat Credit on the amount recovered from the employees for providing subsidized food under the category of outdoor catering services. Before that there was a decision of the larger bench of this Tribunal in the case of GTC Industries Ltd (2008 (9) TMI 56 - CESTAT MUMBAI) wherein it was held that irrespective of the fact whether the appellant has recovered any amount towards providing subsidized food to the employees, the appellant is entitled to take Cenvat Credit. As there was divergent views and same has been settled by the Hon ble High Court of Bombay in the case of Ultratech Cement Ltd. (Supra) on 25.10.2010. Therefore, I hold that in this case extended period of limitation is not invokable as held by the Hon ble High Court of Delhi in the case of Wonderax Laboratories (2007 (10) TMI 388 - DELHI HIGH COURT ) which has been affirmed by the Hon ble Apex Court. As the extended period of limitation is not invokable, therefore penalty under section 11(AC) of the Act is also not imposable. Denial of amount recovered from the employees is calculated on the basis of net amount recovered from the employees towards subsidized food. In fact, the said amount is considered as gross amount inclusive of all taxes. Therefore, the calculation of the actual amount on Cenvat Credit is also required to be computed - Matter remanded back - Decided partly in favour of assessee.

Summary

Issues:
Appeal against denial of input services credit on outdoor catering services due to recovery from employees for canteen services, invoking extended period of limitation, imposition of penalty, and interest liability.

Analysis:
The appellant contested the denial of input service credit on outdoor catering services due to recovering amounts from employees for subsidized food. The adjudicating authority relied on a Bombay High Court decision to confirm the demand for the recovered amount. The appellant argued against the invocation of the extended period of limitation, citing divergent judicial views during that period. The appellant also contended that the recovered amount remained unutilized in their Cenvat Credit account, thus negating the interest liability. The appellant referenced relevant legal precedents to support their arguments.

The respondent argued that the extended period of limitation was rightly invoked since the appellant did not declare their Cenvat Credit on outdoor catering services. The respondent also asserted that penalty imposition and interest payment were justified based on legal precedents, including a Supreme Court decision.

The Tribunal acknowledged the divergent views on the issue but relied on the Bombay High Court decision to conclude that the appellant was not entitled to Cenvat Credit for the recovered amount. The Tribunal held that the extended period of limitation was not applicable, following the Delhi High Court decision, and thus, penalty imposition was deemed inappropriate. Regarding interest liability, the Tribunal referred to a previous case and directed the Adjudicating Authority to verify if the disputed Cenvat Credit was unutilized before confirming the interest liability.

The Tribunal highlighted the need for recalculating the amount to be reversed by the appellant, considering the net amount recovered from employees for subsidized food. The Tribunal instructed the Adjudicating Authority to quantify the amount accurately and verify the utilization status of the reversed amount. The Tribunal remanded the matter back for quantification purposes and to confirm interest liability based on the utilization status of the reversed amount.

In conclusion, the Tribunal set aside the impugned order and remanded the case for quantification and verification, emphasizing the importance of accurately calculating the Cenvat Credit amount and verifying its utilization status to determine interest liability.