2017 (12) TMI 1186 - AT - Central Excise

CENVAT credit - clearing and forwarding agent service - Held that - if clearing and forwarding service involves the services of sales promotion, credit should be available as sales promotion is specifically included in the inclusion clause of definition. However the factual aspect whether the clearing and forwarding service involves sales promotion has not been verified for the reason that Cenvat credit was otherwise being allowed by the department - matter is remanded to the adjudicating authority to pass a fresh order. Penalty u/r 15(1) - Held that - there was no malafide on the part of the respondent in availing credit on clearing and forwarding service. Considering overall facts and circumstances and since credit being allowed by the department for the past period respondent have rightly entertained the bonafide belief that credit is legally admissible. Therefore respondent is not liable for penalty u/r 15(1). Appeal allowed in part and aprt matter on remand.

Summary

Issues:
Admissibility of Cenvat credit on clearing and forwarding agent service, imposition of penalty under Rule 15(1).

Analysis:

Admissibility of Cenvat Credit on Clearing and Forwarding Agent Service:
The case involved the respondent availing Cenvat credit for clearing and forwarding agent services from April 2012 to December 2012. The adjudicating authority confirmed the demand and imposed a penalty under Rule 15(1). The Commissioner(Appeals) dismissed the Order-in-Original, leading to the Revenue appealing the decision. The Revenue argued that the Gujarat High Court disallowed Cenvat credit on such services in a previous case, making the issue settled in favor of the Revenue. On the other hand, the respondent's counsel contended that if the clearing and forwarding agent service involved sales promotion, the credit should be admissible as per the inclusion clause in the definition of input service under Rule 2(l) of Cenvat Credit Rules, 2002. The counsel further argued that the verification of whether the service involved sales promotion was not conducted, and the respondent had a bonafide belief in the admissibility of the credit since it was allowed by the department in previous periods. The Tribunal noted that the factual aspect regarding sales promotion was not verified due to the department's previous allowance of the credit, indicating no malafide intent on the respondent's part. Consequently, the Tribunal set aside the penalty and remanded the matter to the adjudicating authority for a fresh order after verifying the facts.

Imposition of Penalty under Rule 15(1):
The Tribunal found that since the credit was allowed by the department for past periods and the respondent had a bonafide belief in the legality of the credit, there was no malafide intent in availing the Cenvat credit on clearing and forwarding agent services. As a result, the Tribunal held that the respondent was not liable for the penalty under Rule 15(1) and set it aside. The decision was based on the overall facts and circumstances of the case, emphasizing the respondent's genuine belief in the admissibility of the credit due to past departmental practices.

In conclusion, the Tribunal's judgment focused on the admissibility of Cenvat credit on clearing and forwarding agent services, considering the inclusion of sales promotion in the definition of input service. The decision highlighted the importance of verifying factual aspects and the respondent's bonafide belief in the legality of the credit based on past departmental practices, ultimately leading to the setting aside of the penalty and remanding the matter for further verification.