2016 (9) TMI 732 - AT - Central Excise

Levy of penalty - validity of order of commissioner (appeals) in reducing the penalty - wrong availing of ineligible Cenvat Credit - improper duty paying documents - credit was reversed with interest at the instance of audit party - Held that - When the said appellate authority is satisfied that it is a clear case of suppression of material facts, he cannot then go beyond the intention of the legislature in Explanation 1 to Section 11A (2B) ibid, and will necessarily have to uphold imposition of penalty equal to duty as mandated for such situations in Section 11AC ibid. The action of the Commissioner (Appeals) reducing the penalty under Rule 15 read with Section 11AC ibid for the period April .2009 to February 2011, trangresses the legal provisions as applicable during that period. Hence that portion of the impugned order reducing the penalty amount of ₹ 31,11,108/- to ₹ 22,14,085/- for the period April, 2009 to February, 2011 is set aside and the order of adjudicating authority imposing penalty equal to duty demanded will stand restored. - levy of penalty restored - Decided in favor of revenue.

Summary

Issues:
1. Availment of CENVAT credit on service tax group resource sharing expenses.
2. Validity of invoices issued by sister concerns for shared expenses.
3. Adjudication of demands and penalties by the authorities.
4. Appeal against the Commissioner (Appeals) order on penalty reduction.
5. Interpretation of Section 11A (2B) of the Central Excise Act, 1944.

Analysis:

1. The case involved the respondent availing CENVAT credit on service tax group resource sharing expenses through invoices issued by sister concerns. The department contended that these expenses were merely shared between group companies without actual services being provided, leading to the issuance of show cause notices.

2. The adjudicating authority confirmed the demands raised in the show cause notices, ordering recovery of irregularly availed CENVAT credit and imposing penalties under the CENVAT Credit Rules, 2004. The Commissioner (Appeals) upheld the demands for one period but reduced the penalty for another period due to the respondent's reversal of a portion of the amount before the issuance of the show cause notice.

3. The department appealed against the Commissioner (Appeals) order, arguing that since the irregular credit was availed through suppression of facts, the penalty under Section 11AC should be imposed. The issue before the tribunal was whether the reduction of penalty by the Commissioner (Appeals) was correct in law.

4. The tribunal analyzed Section 11A (2B) of the Central Excise Act, 1944, which allows for voluntary payment of duty before the issuance of a show cause notice, barring cases involving fraud, collusion, or suppression of facts. The tribunal found that since the details of the irregular credit were not disclosed until verification, it constituted suppression of material facts, disqualifying the respondent from the benefits of Section 11A (2B).

5. Consequently, the tribunal set aside the reduction in penalty by the Commissioner (Appeals) and upheld the imposition of penalty equal to the duty demanded by the adjudicating authority. The rest of the impugned order was left undisturbed, and the department's appeal was allowed on this specific issue.

This detailed analysis highlights the procedural and legal aspects of the case, focusing on the interpretation of relevant provisions and the tribunal's decision regarding the imposition of penalties for irregularly availed CENVAT credit.