2016 (10) TMI 484 - AT - Central Excise

Cenvat credit - denial of amount of ₹ 1.20 Crore - documents on which credit was taken are not proper - Held that - the entire credit is related to 16 services which are specified under Rule 6(5). The credit was denied on the basis of a report submitted by Superintendent (Adjudication) that there are some discrepancies in the documents. However there is no finding of the Adjudicating Authority that the input service was not received or payments there against were not made by the appellant. Moreover it is observed that the Adjudicating Authority has not given sufficient opportunity to the appellant for explaining the discrepancies to the Adjudicating Authority. Therefore, we find that to this extent, the Adjudicating Authority has grossly violated the principle of natural justice. Cenvat credit - denial of amount of ₹ 80 lakhs - credit attributed to the trading activity and not related to the manufacturing activity - Held that - there is no dispute that the said Cenvat credit is attributed to the trading activity. Therefore, the same is primafacie not admissible to the appellant. Period of limitation - credit taken during the period 2008 to 2011 and the show cause notice was issued on 13-03-2013 - appellant have been submitting monthly returns alongwith details of Cenvat credit availed by them from time to time - suppression of facts - Held that - the appellant is engaged in the manufacturing of final product and availing the credit on various services. However it cannot be ascertained from the record that part of the services are used for trading activity, therefore the department had no occasion to know this fact even from Cenvat statement and monthly returns filed by the appellant. Therefore, it cannot be said that there is no suppression of fact on the part of the appellant. Demand - wrong availment of Cenvat credit - Held that - it is observed that this demand is towards an amount of Cenvat credit of input services utilized for payment of excise duty. In the judgment cited by the appellant in the case of CCE vs Raghuvar (India) Ltd. 2000 (5) TMI 40 - SUPREME COURT OF INDIA , the issue has been settled in favour of the appellant. We further find that as against wrong availment of Cenvat credit, there cannot be made double demand i.e. one of an amount of wrongly availed credit and second an amount of Cenvat credit utilized out of the same wrongly availed credit. This exercise will clearly amount to duplication of demand of the same amount, therefore the demand is primafacie, not sustainable.

Summary

Issues:
1. Disallowance of Cenvat credit amounting to Rs. 1,97,62,992/-.
2. Confirmation of Service Tax demand of Rs. 1,03,95,824/-.
3. Imposition of penalty equal to the disallowed amounts.

Analysis:

Issue 1: Disallowance of Cenvat Credit
The Commissioner disallowed Cenvat credit of Rs. 1,97,62,992/- citing discrepancies in the documents used to claim the credit. The appellant argued that the credit was for services covered under Rule 6(5) of Cenvat Credit Rules, 2004, and should not be disallowed solely based on document discrepancies. They contended that they were not given a chance to explain the discrepancies, leading to a violation of natural justice. The Tribunal found that the Adjudicating Authority violated the principle of natural justice by not providing adequate opportunity to the appellant to clarify the discrepancies. Therefore, the disallowance of the credit was deemed unjust.

Issue 2: Confirmation of Service Tax Demand
The demand for Service Tax of Rs. 1,03,95,824/- was confirmed due to the disallowed Cenvat credit. The appellant argued that once the credit was disallowed, demanding the same amount as Service Tax would result in double taxation, citing a Supreme Court judgment. The Tribunal agreed that demanding Service Tax on an amount already disallowed as Cenvat credit would amount to duplication of demand. Therefore, the Service Tax demand was considered unsustainable.

Issue 3: Imposition of Penalty
Considering the facts and circumstances of the case, the Tribunal directed the appellant to make a pre-deposit of Rs. 40 lakhs within four weeks towards the Cenvat demand. The balance amount of adjudged dues was waived, subject to the appellant making the pre-deposit. The Tribunal emphasized that compliance with the pre-deposit was to be reported by a specified date.

In conclusion, the Tribunal found in favor of the appellant regarding the disallowance of Cenvat credit and the confirmation of Service Tax demand, highlighting violations of natural justice and the principle against double taxation. The penalty was imposed with a pre-deposit requirement and a waiver of the balance amount, subject to compliance.