2018 (3) TMI 1548 - AT - Central Excise

Interest - penalty - CENVAT credit - duty paying documents - GAR-7 challan - It was observed that no bills (for provisions made of the import of services) were received nor any payments were effected for the said services till the date of audit - contravention of Rule 7 of Point of Taxation Rules, 2011 read with Rule 4(7) of the CENVAT Credit Rules, 2004 - Held that - Admittedly the credit availed by the assessee was lying in their accounts only without being utilised. In such a scenario, the confirmation of interest or imposition of penalty is not justified - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Alleged contravention of Rule 7 of Point of Taxation Rules, 2011 read with Rule 4(7) of the CENVAT Credit Rules, 2004.
2. Confirmation of demand of ?43,10,435/- by Commissioner (Appeals).
3. Setting aside of interest and penalty imposed by Commissioner (Appeals).
4. Application of the Hon'ble High Court of Karnataka decision in the case of Commissioner of Central Excise & S.T. LTU Bangalore Vs. Bill Forge Pvt. Ltd.
5. Assessment of malafide intent and bonafide belief in availing Service Tax credit.

Analysis:

1. The appellant was engaged in the manufacture of 'Bumper parts' and availed CENVAT credit of duty paid on inputs/Capital Goods and Service Tax paid on inputs services. The issue arose during an EA-2000 Audit where it was found that the appellant paid Service Tax under the Reverse Charge Mechanism on import of services but did not receive bills or make payments for the same. This led to an allegation of contravention of tax rules, resulting in a show-cause notice and subsequent Order-in-Original.

2. The Commissioner (Appeals) confirmed a demand of ?43,10,435/- but set aside the interest and penalty imposed on the respondent. The appellant's credit remained unutilized during the disputed period, invoking the Hon'ble High Court of Karnataka decision. The Commissioner considered the absence of malafide intent in availing the credit post-payment and the reversal of credit before utilization, leading to the setting aside of interest and penalty.

3. The Tribunal found no fault in the Commissioner (Appeals) order, noting that the credit remained unutilized in the appellant's accounts. In such circumstances, the confirmation of interest or penalty was deemed unjustified, aligning with various legal precedents cited in the impugned order. Consequently, the Revenue's appeal was rejected, upholding the decision of the Commissioner (Appeals).

This detailed analysis of the judgment highlights the key issues, legal arguments, and the reasoning behind the decision rendered by the Tribunal, providing a comprehensive understanding of the case.