2016 (7) TMI 654 - AT - Central Excise

Extended period of limitation - Levy of penalty - Cenvat Credit - input services - nexus with manufacturing activity - service tax paid on Travel Services relating to transport of their employees though transport of employees - Held that - the appellant s action of taking cenvat credit even on the part amount, which was recovered from the employees in case of facility of travel to and fro, is only a bonafide action; no malafides cannot be attached to the said action of taking cenvat credit. In the present appeal period involved is from 2005-06 to 2009-10. When the certainty for the principle that cenvat credit is not to be allowed in case of service tax paid on the component of the payment made by the employees for input service of travel was decided by Hon ble Bombay High Court by its pronouncement dated 25.10.2010 in the case of CCE, Nagpur Vs. Ultratech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT , it cannot be held that the appellant had willfully suppressed the fact of irregular cenvat credit in case of input service of traveling. It is, therefore, right to conclude that the subject demand and recovery would be legally unauthorized beyond the normal period of one year from the relevant date. The case is remanded to the original adjudicating authority, who will freshly adjudicate and arrive at the revised liability of disallowed cenvat credit along with liability of interest for the normal period of one year after following the observations and the conclusions made by the Tribunal in above paras. - Decided in favor of assessee.

Summary

Issues:
1. Disallowance of cenvat credit by the Commissioner (Appeals) LTU, Bangalore.
2. Allegations of suppression of facts and intention to evade payment of duty.
3. Applicability of cenvat credit on Travel Services.
4. Time-barred demand for recovery of cenvat credit.
5. Imposition of penalty under Rule 15(2) of Cenvat Credit Rules.

Analysis:

Issue 1: Disallowance of cenvat credit
The appellant contested the disallowance of cenvat credit amounting to Rupees 2,15,541 related to Travel Services availed during 2005-06 to 2009-10. The Revenue contended that the credit was availed for transport of employees unrelated to manufacturing activities. The Order-in-Original allowed a partial credit but disallowed the amount recovered from employees. The appellant argued that the credit was legitimate as per precedents allowing credit on services even partially borne by employees.

Issue 2: Allegations of suppression of facts
The appellant refuted allegations of suppression, asserting that the demand was time-barred beyond one year. The advocate cited precedents to support the claim that no suppression existed, thus limiting the demand period. The Tribunal found no conclusive evidence of suppression, leading to the dismissal of the demand beyond the normal one-year period.

Issue 3: Applicability of cenvat credit on Travel Services
The appellant justified claiming cenvat credit on Travel Services, aligning with precedents permitting credits even when employees contribute partially. The Tribunal upheld the appellant's contention, emphasizing bonafide intentions in availing the credit, supported by legal precedents.

Issue 4: Time-barred demand
The appellant argued that the demand was time-barred, citing precedents and lack of intent to evade duties. The Tribunal concurred, ruling that the demand beyond one year lacked legal basis due to the absence of suppression or contravention.

Issue 5: Imposition of penalty under Rule 15(2)
The Tribunal found the penalty imposed under Rule 15(2) unjustified as there was no evidence of fraud, willful misstatement, or suppression of facts. The penalty was set aside, aligning with the provision's requirement of wrongful credit due to intentional evasion, which was not established in this case.

In conclusion, the Tribunal allowed the appeal by remanding the case to reassess the disallowed cenvat credit and interest liability within the one-year period, emphasizing the absence of suppression or intent to evade duties. The decision highlighted the importance of legal precedents and bonafide actions in claiming cenvat credit, ultimately setting aside the penalty imposed under Rule 15(2).