2017 (12) TMI 149 - AT - Central Excise

Interest - CENVAT credit - trading activity - case of appellant is that though the credit was availed attributable to the trading activity, the same was lying unutilized therefore interest even for the period April, 2010 to March, 2012 is not recoverable - Held that - issue is squarely covered by Hon ble Supreme Court in case of Union of India Versus Ind-Swift Laboratories Ltd. 2011 (2) TMI 6 - Supreme Court wherein it was held that as per the amended Rule 14 upto 31st March 2012 interest was chargeable on the wrong availement of credit for taking or utilizing the wrong availement of credit from 1-4-2012, the term Taken or utilized substitute with taken and utilized therefore prior to 1-4-2012, even if the Cenvat credit was not utilized but only taken wrongly interest is chargeable - interest for the period from April, 10 to March, 12 was rightly demanded. Penalty u/s 11AC - extended period of limitation - Held that - appellant was very much knowing that they are manufacturing and clearing dutiable goods as well as doing trading activity which is neither chargeable to duty nor to service tax and despite this fact they availed credit on common input service. It is only on pointed out by the audit party they have reversed the amount there is clear suppression of facts on the part of the appellant. Extended period of demand is rightly invoked - Ingredients for invoking extended period under proviso to Section 11A(1) is pari materia to the ingredient provided for imposition of penalty under Section 11AC - penalty also confirmed. Appeal dismissed - decided against appellant.

Summary

Issues:
Availability of Cenvat credit on input service attributable to trading activity; Interpretation of Cenvat provisions; Recoverability of interest on unutilized credit; Imposition of penalty under Section 11AC.

Analysis:

1. Availability of Cenvat Credit on Input Service:
The appellant, engaged in manufacturing excisable goods and trading PVC adhesive compound, availed Cenvat credit on common input services used for both dutiable goods and trading activity. The show cause notice alleged ineligibility for Cenvat credit as per Rule 6(i) for input services used in manufacturing exempted goods or services. The issue revolved around the interpretation of Cenvat provisions, particularly regarding trading activity. The appellant argued that the amendment in the Cenvat credit rules from 1-4-2011 made the issue contentious, and no malafide intentions were proven. Despite immediate repayment upon audit detection, the penalty under Section 11AC was imposed. Various judgments were cited, but the tribunal upheld the demand for Cenvat credit attributable to trading activity, citing the unambiguous nature of Rule 6(1) and the suppression of facts by the appellant.

2. Recoverability of Interest on Unutilized Credit:
Regarding the demand for interest from April 2010 to March 2012, the appellant contended that since the credit was unutilized, interest should not be recoverable. However, the tribunal referred to a Supreme Court ruling stating that interest was chargeable even if the credit was only taken, not utilized, prior to 1-4-2012. Therefore, the demand for interest for the specified period was upheld.

3. Imposition of Penalty under Section 11AC:
The tribunal upheld the penalty imposed under Section 11AC, emphasizing the appellant's awareness of availing credit on common input services despite knowing the trading activity was not subject to excise duty or service tax. The tribunal found suppression of facts by the appellant, leading to the imposition of the penalty. The appellant's failure to challenge the demand or invoke the extended period further supported the penalty imposition. The tribunal rejected the cited judgments, emphasizing the need to consider individual case facts for penalty determination.

In conclusion, the tribunal dismissed the appeal, upholding the demand for Cenvat credit attributable to trading activity, the interest for the specified period, and the penalty under Section 11AC due to the suppression of facts by the appellant and the unambiguous nature of Rule 6(1) in the context of the case.