2018 (2) TMI 619 - AT - Central Excise

CENVAT credit - common input services used in manufacture o taxable as well as exempt goods - Held that - certain common services were used for both the entities i.e. for the premises of the respondent as well as of M/s. Keva Flavours decided that the respondent is entitled for credit to the ratio of 95% - the respondent shall get the cenvat credit on the services which was received and used for the purpose of their premises to that extent it cannot be denied - appeal dismissed - decided against Revenue.

Summary

Issues:
- Availment of Cenvat credit on common input services shared with other entities
- Failure to register as an Input Service Distributor
- Imposition of penalty under Section 11AC

Analysis:
1. Availment of Cenvat credit on common input services shared with other entities:
The respondents availed credit on services like security, computer training, consultancy, legal, and secretarial services shared with other entities without exclusive use in manufacturing. The department issued a show cause notice leading to the impugned order. The Commissioner (Appeals) found that 95% of the credit was attributable to the respondent, as they occupied 95% of the area. The matter was remanded for verification, and the penalty was set aside due to lack of malafide intention.

2. Failure to register as an Input Service Distributor:
The Revenue contended that the Commissioner erred in allowing 95% credit without specific Rule support. The respondent's failure to register as an Input Service Distributor and issue invoices was highlighted. The Revenue argued that the credit was inadmissible due to suppression of facts, justifying the imposition of penalty under Section 11AC.

3. Imposition of penalty under Section 11AC:
The Ld. Counsel for the respondent supported the Commissioner (Appeals) decision, emphasizing the lack of malafide intention. The Tribunal upheld the Commissioner's findings, stating that the credit was rightfully attributed to the respondent based on usage. The penalty under Section 11AC was deemed unwarranted due to the major portion of credit entitlement to the respondent. Consequently, the Revenue's appeal was dismissed, affirming the impugned order.

In conclusion, the Tribunal upheld the decision regarding the availment of Cenvat credit on shared services, the failure to register as an Input Service Distributor, and the penalty imposition under Section 11AC. The judgment highlighted the importance of proper utilization of credits and absence of malafide intentions in determining liability and penalties in such cases.