2016 (6) TMI 618 - AT - Service Tax

Levy of penalty - Cenvat Credit - duty paying documents - removal / transfer of capital goods to SSAs - Held that - The appellant ought to have paid the duty or reversed the credit availed when the capital goods were transferred. The appellant has reversed the credit after passing of the order-in-original. The violation of provision of Rule 3(5) is explicit. - There is no ground for waiver of penalty - Decided against the assessee.

Summary

Issues:
1. Wrong availing of CENVAT Credit on certain inputs and capital goods.
2. Failure to produce proper cenvatable documents.
3. Availing credit on capital goods without reversing it after transfer to other units.
4. Imposition of penalty.

Analysis:
1. The appellant, a service provider registered with the service tax department, availed CENVAT Credit on inputs and capital goods. However, upon verification, it was found that the appellant wrongly availed credit on certain items. The original authority confirmed a demand of ?21,62,259/- due to the appellant's failure to produce proper cenvatable documents. Additionally, a demand of ?12,45,185/- was confirmed as credit taken on capital goods that were later transferred to other units. The original authority imposed penalties along with interest, leading to this appeal.

2. The appellant's counsel did not contest the demand of ?21,62,259/- as the necessary Central Excise Invoices were not produced. However, regarding the demand of ?12,45,185/-, it was argued that the appellant availed credit on capital goods initially meant for one unit but later transferred to other units without reversing the credit. The counsel cited Rule 3(5) of the CENVAT Credit Rules, 2004, which requires the reversal of credit upon removal of capital goods. The appellant reversed the credit only after the original order, and it was contended that the demand was not sustainable as the other units eventually availed the credit.

3. The tribunal was not convinced by the appellant's arguments. It was noted that the duty should have been paid or credit reversed when the capital goods were transferred to other units. The appellant reversed the credit only after the original order, which was a violation of Rule 3(5). The tribunal found that the appellant wrongly availed credit without proper documents and failed to reverse the credit on capital goods upon transfer. As the reversal was done post the adjudication order, the penalty was deemed necessary. The tribunal concluded that the appeal lacked merit and dismissed it.

4. In summary, the tribunal upheld the original authority's decision confirming the demands related to the wrongful availing of CENVAT Credit on inputs and capital goods. The failure to produce proper documents and the non-reversal of credit on transferred capital goods led to the imposition of penalties. The tribunal found no grounds to waive the penalty and dismissed the appeal, emphasizing the importance of compliance with CENVAT Credit Rules.