2016 (6) TMI 399 - AT - Central Excise

Ineligibility of cenvat credit - waiver of penalty - Held that - As find that there is no suppression of facts as suppression is a finding which would presuppose non disclosure and there has been no withholding of information in the instant case. A mere failure to disclose certain facts to the department would not result in willful suppression of facts as decided by the Hon ble Supreme Court on various occasions and in particular in the case of Pahwa Chemicals Pvt. Ltd. Vs- CCE (2005 (9) TMI 92 - SUPREME COURT OF INDIA) wherein held that mere failure to declare does not amount to willful mis-declaration or willful suppression. There must be some positive act on the part of the party to establish either willful mis-declaration or willful suppression. All the particulars were culled out only from the respondent s record. It is also a fact that when the department culls out a case from the record of the assessee the allegation of suppression is unsustainable. The respondent has raised a specific plea that the Audit parties have visited their unit several times and the Revenue is fully aware of their activities. This fact has not been countered by the Revenue stating that the appellant s record were not inspected and that Audits were not conducted. I find that all the judgements relied upon by the Revenue are inapplicable as in the instant case the availment of cenvat credit was on account of misinterpretation of rules by the appellant and the Revenue had conducted Audits which would go to show that there was in fact no suppression of facts. Thus the appellants are entitled to grant of waiver of penalty.

Issues:
1. Availing credit for service tax on specific services.
2. Eligibility of services for credit.
3. Penalty imposition under Section 11AC of the Central Excise Act.

Issue 1: Availing credit for service tax on specific services
The appeals involved M/s. Sundram Fasteners Ltd., who availed credit for excise duty on inputs, capital goods, and service tax paid on input services. The specific services in question were Rent-a-cab service, outward freight service, courier service, hospital service, construction service of school, canteen, temple, garden maintenance service, and auctioneering service for waste disposal. The period of dispute ranged from December 2010 to October 2012. The adjudicating authority disallowed credit for certain services, leading to demands and penalties under Section 11AC of the Central Excise Act. The appellants did not contest the ineligibility of the credit but sought a waiver of the penalties imposed.

Issue 2: Eligibility of services for credit
The Revenue argued that the services for which the appellant claimed credit were not eligible under the relevant rules. They highlighted that the services were not directly or indirectly related to the manufacture of final products, both before and after April 1, 2011. The Revenue relied on various decisions to support their stance, emphasizing that none of the services qualified for credit eligibility. However, the appellant's counsel contended that there was no intent to evade duty, as the details were available in statutory records, and any misinterpretation of rules was rectified promptly by reversing the credit and paying appropriate interest. The Tribunal noted that there was no suppression of facts, as all particulars were derived from the appellant's records, and audits by the Revenue confirmed awareness of the appellant's activities. The Tribunal found that the judgments cited by the Revenue were not applicable in this case, as the credit availed was due to a misinterpretation of rules rather than willful suppression of facts.

Issue 3: Penalty imposition under Section 11AC of the Central Excise Act
After considering the arguments and facts presented, the Tribunal held that the appellants were entitled to a waiver of penalties. The Tribunal emphasized that there was no suppression of facts, as the Revenue was aware of the appellant's activities through audits and records. Citing previous judgments, the Tribunal clarified that mere failure to disclose certain facts does not constitute willful suppression. Therefore, the penalties imposed on the appellants were set aside, and the appeals were partly allowed in favor of the appellants.

This detailed analysis of the judgment highlights the issues surrounding the availing of credit for specific services, the eligibility of services for credit, and the penalty imposition under Section 11AC of the Central Excise Act. The Tribunal's decision to grant a waiver of penalties was based on the absence of suppression of facts and the appellant's prompt corrective actions upon realizing the misinterpretation of rules.

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