2017 (5) TMI 1132 - AT - Service Tax

Penalty u/s 78 - wrongful availment of Cenvat credit in respect of sales commission and thereafter the distribution of the same to their factory at Gujarat - Held that - the subject amount of Cenvat credit of ₹ 2,19,981/- cannot be the part of the proceedings initiated by Revenue at two places, though assessee may have offices registered under the Revenue at two places - When Commissioner, Ahmedabad-III has already confirmed the demand disallowing the Cenvat credit amounting to ₹ 3,55,20,028/- which included the Cenvat credit involved in the present proceedings amounting to ₹ 2,19,981/-, there cannot be any question to penalise twice for wrong Cenvat credit taken by the assessee once - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Section 78 of the Finance Act for wrongly claiming Cenvat credit in respect of sales commission.
2. Duplication of penalty for the same offense in separate proceedings initiated by Revenue.

Analysis:

Issue 1: Imposition of Penalty for Wrongly Claiming Cenvat Credit
The appellant, a registered input service distributor, filed an appeal against the penalty imposed under Section 78 of the Finance Act for wrongly claiming Cenvat credit in relation to sales commission paid to dealers during 2013-2015. The appellant had claimed Cenvat credit for the commission, which was deemed ineligible based on a decision by the Hon'ble Gujarat High Court. The original order dated 31.3.2016 imposed a penalty of ?2,19,981, which was upheld by the impugned order. Additionally, the appellant was issued another Show Cause Notice by the Assistant Commissioner at Ahmedabad for the same offense. The proceedings at Ahmedabad resulted in disallowance of Cenvat credits amounting to ?3,55,20,028, with penalties imposed under Rule 15(1) of Cenvat Credit Rules, 2004.

Issue 2: Duplication of Penalty in Separate Proceedings
The appellant argued that the Cenvat credit amount of ?2,19,981, for which an equivalent penalty was imposed in the impugned order, was part of the Order-in-Original dated 27.11.2015 issued by the Commissioner, Central Excise, Ahmedabad-III. The appellant contended that penalizing them twice for the same Cenvat credit amount in separate proceedings initiated by Revenue would be unjust. Both sides agreed that the subject amount of Cenvat credit could not be part of proceedings at two places, even if the assessee had offices registered under Revenue at multiple locations. The Commissioner, Ahmedabad-III had already confirmed the demand disallowing the Cenvat credit, including the amount in question. Therefore, penalizing the appellant twice for the same offense was deemed duplicative and unjust.

In conclusion, the penalty of ?2,19,981 imposed by the impugned order was found to be a duplication of proceedings against the assessee. As a result, the penalty was dropped, and the impugned order was modified accordingly, allowing the appeal with any consequential relief deemed necessary.