2019 (6) TMI 1498 - AT - Central Excise

Reversal of CENVAT Credit - services used in relation to abandoned project - even one ounce of product was not produced - extended period of limitation - penalty - HELD THAT - The appellant availed CENVAT Credit on the services used in relation to setting up of Seemless Tube Mill Project which was abandoned without even producing one ounce of product. Input services or services which are used in or in relation to manufacture of final products including the business related to the final products, the entire project has been abandoned and there is no manufacture whatsoever. It would have been a different case if the project had run for some time and some goods were manufactured and thereafter the project was abandoned. In this case the appellant decided to abandon the project before it is even set up - Under these circumstances, it is found that by no stretch of imagination can the services on which CENVAT Credit has been availed, be related to the manufactured final products either directly or indirectly or any business related to such manufactured products. Extended Period of Limitation - penalty - HELD THAT - The assessee cannot plead ignorance. They are a very large Public Sector Undertaking in operation for several decades and have been handling the matters of indirect taxation. Under these circumstances, the assessee has suppressed the information that they have abandoned the Seemless Tube Mill Project on which they have already availed the CENVAT Credit -The extended period of limitation has been rightly invoked in this case and penalty has been correctly imposed. Appeal dismissed - decided against appellant.

Summary

Issues:
- Entitlement to CENVAT Credit for services used in an abandoned project
- Invocation of the extended period of limitation
- Imposition of penalty

Entitlement to CENVAT Credit for services used in an abandoned project:
The case involved an appeal against the disallowance of CENVAT Credit by the Commissioner for services used in setting up an abandoned Seemless Tube Mill Project. The appellant argued that they were eligible for the credit as the project was in relation to their business, even though no goods were produced from it. The Tribunal, after considering both sides, found that the appellant cannot claim the credit as the project was abandoned before any production occurred. The Tribunal emphasized that the services must be related to the manufactured final products, directly or indirectly, for the credit to be allowed. Since the project was abandoned before any manufacturing took place, the appellant was not entitled to the CENVAT Credit. The Tribunal also noted that the appellant failed to inform the department about the project's abandonment, despite being a large firm with expertise in taxation matters.

Invocation of the extended period of limitation:
The Tribunal upheld the invocation of the extended period of limitation by the Commissioner. It was found that the appellant did not reverse the CENVAT Credit or inform the department about the project's abandonment, even after deciding to abandon it. The Tribunal stressed that in the absence of explicit provisions allowing the use of CENVAT Credit for abandoned projects, the appellant should have informed the department about the abandonment. The Tribunal held that the extended period of limitation was rightly invoked in this case.

Imposition of penalty:
The Tribunal affirmed the imposition of a penalty of ?5.00 lakhs on the appellant. It was considered a reasonable penalty given the wrongful availing of CENVAT Credit. The Tribunal noted that the penalty amount was not excessive considering the amount of credit wrongly claimed by the appellant. The Tribunal found that the penalty was correctly imposed in line with the provisions of the law.

In conclusion, the Tribunal upheld the Commissioner's order disallowing the CENVAT Credit, invoking the extended period of limitation, and imposing the penalty. The appeal was rejected, and the impugned order was upheld without any interference.