2016 (9) TMI 1539 - Commissioner - Central Excise

CENVAT Credit - common input services used in excisable goods and providing exempted service i.e. trading - Rule 6(2) of CENVAT Credit Rules 2004 - extended period of limitation - penalty. HELD THAT - Since the trading activity is a exempted services even after 01-07-2012 therefore I find that in backdrop of the undisputed fact that the Noticee has neither maintained separate accounts as required under Rule 6(2) of CENVAT Credit Rules 2004 nor have filed option under Rule 6(3A) ibid I find that Noticee is required to pay an amount at the rates specified in Rule 6(3) ibid - Rule 6(3A) of CENVAT Credit Rules 2004 inserted vide Notification No 13/2016-Central Excise (NT) dated 01-03-2016 is having effect from 01-04-2016 i.e it is having prospective effect. The dispute pertains to the period from 2011-2012 and 2012-2013 therefore the said Rule cannot be applied retrospectively. The Noticee are liable to pay an amount of 27, 72, 837/ - as worked out in Show Cause Notice under Rule 6(3) of CENVAT Credit Rules 2004. The explanation III to Rule 6 ibid provides that the amount payable under Rule 6(3) ibid shall be recovered under provisions of Rule 14 ibid. Upon referring to Rule 14 of CENVAT Credit Rules 2004 I find that it stipulates that it shall be recoverable under Section 11A of Central Excise Act 1944 along with interest under Section 11AA ibid. Thus the question carved at Para 13 (i) is answered in affirmation. The fact of trading activity came to the knowledge of the department only during the course of audit. Prior to that Noticee has not intimated anything to the department Thus the Noticee has willfully suppressed the fact with an intention to evade the payment of amount under Rule 6(3) of CENVAT Credit Rules 2004 and have availed and utilized ineligible CENVAT credit. Therefore the extended period has been rightly invoked under Section 11A(5) of Central Excise Act 1944. The Noticee are liable for penalty equal to 50% of the amount under Rule 15 of CENVAT Credit Rules 2004 read with Section 11A(5) of Central Excise Rules 2002 read with Section 11AC(1)(b) ibid. Thus the point is answered in affirmation.

Summary

Issues Involved:
1. Liability to pay an amount along with interest under Rule 6(3) of CENVAT Credit Rules, 2004.
2. Justification of the invocation of the extended period.
3. Imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Liability to Pay an Amount Along with Interest:
The Noticee engaged in manufacturing excisable goods and trading activities did not maintain separate accounts for input services as required under Rule 6(2) of CENVAT Credit Rules, 2004. Consequently, they were liable to pay an amount at the rates specified in Rule 6(3). The Noticee argued that trading was not an exempted service post-01-07-2012; however, the adjudicating authority found that trading remained an exempted service throughout the period in question. The authority confirmed the liability to pay ?27,72,837/- under Rule 6(3) read with Rule 14 of CENVAT Credit Rules, 2004 along with interest under Section 11AA of Central Excise Act, 1944.

2. Justification of the Invocation of the Extended Period:
The department discovered the non-compliance during an audit, indicating willful suppression of facts by the Noticee. The Noticee did not disclose their trading activities or the availing of CENVAT credit on common input services. As a result, the extended period of five years under Section 11A of Central Excise Act, 1944 was invoked, which the adjudicating authority found justified due to the Noticee's willful suppression and evasion of payment.

3. Imposition of Penalty:
Given the willful suppression of facts and intent to evade payment, the provisions of Rule 15(2) of CENVAT Credit Rules, 2004 were applicable. The authority imposed a penalty equal to 50% of the confirmed amount, amounting to ?13,86,419/-, under Rule 15 read with Section 11AC of Central Excise Act, 1944. The adjudicating authority emphasized that the Noticee's actions warranted this penalty due to the fraudulent intent and non-compliance with the statutory provisions.

Conclusion:
The adjudicating authority confirmed the demand of ?27,72,837/- along with interest and imposed a penalty of ?13,86,419/-. The Noticee's arguments regarding the non-existence of trading as an exempted service post-01-07-2012 and the proportional reversal of CENVAT credit were found without merit. The extended period invocation was justified, and the penalty was imposed due to willful suppression and intent to evade payment. The Show Cause Notice was thus decided in favor of the department, confirming the liabilities and penalties against the Noticee.