2017 (6) TMI 204 - AT - Central Excise

Penalty - denial of CENVAT credit - Outdoor Catering Services - Held that - there was no direction by the Tribunal to impose penalty as the appellant was under a bona fide belief that he is entitled to the CENVAT credit on outdoor catering service - during the relevant time, there were conflicting decisions and the assessee had a bona fide belief that he is entitled to CENVAT credit on outdoor catering service. When the issue relates to interpretation of law, imposition of penalty is not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Entitlement to CENVAT credit on outdoor catering services
- Imposition of penalty under Rule 15(3) of CCR, 2004

Entitlement to CENVAT credit on outdoor catering services:
The appellants, engaged in manufacturing Ceramic Glazed Tiles, availed CENVAT credit on service tax paid for Outdoor Catering Services. The Department issued show-cause notices alleging ineligibility for this credit. The Order-in-Original set aside the demand following a precedent allowing such credit. The Commissioner (A) upheld this decision. However, the Tribunal, relying on a different case, disallowed the credit and remanded the matter for quantification. The Deputy Commissioner quantified the disallowed credit, leading to a penalty imposition dispute. The appellant argued that they believed in their eligibility for the credit based on conflicting decisions and the absence of a penalty direction in the remand order. The Tribunal found in favor of the appellant, citing their bona fide belief and conflicting legal interpretations, ultimately setting aside the penalty.

Imposition of penalty under Rule 15(3) of CCR, 2004:
The appellant contested the penalty imposition, arguing that the issue involved interpretation of law and they acted in good faith based on precedents. The appellant emphasized the lack of evidence proving fraudulent intent or contravention of provisions to evade duty payment. Relying on relevant case law, the appellant asserted that penalties are not justified in situations involving interpretation of law. The Tribunal, after considering both parties' submissions and the records, agreed with the appellant's arguments. The Tribunal found that the appellant's belief in their entitlement to the credit, based on conflicting decisions and legal interpretations, justified setting aside the penalty. As the appellant had paid the demanded amount along with interest, the Tribunal deemed the penalty imposition unwarranted.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Rule 15(3) of CCR, 2004, based on the appellant's genuine belief in their entitlement to the CENVAT credit on outdoor catering services and the conflicting legal interpretations prevailing at the relevant time.