2018 (5) TMI 666 - AT - Central Excise

CENVAT credit - wrongly availed CENVAT credit - interest - penalty - Held that - Since this material fact whether the appellant has availed as well as utilized the inadmissible credit during the period November 2008 to October 2009 is disputed, therefore, it is necessary for me to remand this case to the original authority to verify and quantify the inadmissible credit whether utilized by the appellant during the period November 2008 to October 2009 and thereafter, pass de novo order deciding the quantum of penalty to be imposed on the appellant for utilizing the inadmissible credit - appeal allowed by way of remand.

Summary

Issues:
- Disallowance of CENVAT credit on services related to trading of goods
- Imposition of penalty under Rule 15(2) read with Section 11AC of the Central Excise Act
- Dispute regarding availing and utilization of inadmissible credit during a specific period

Issue 1: Disallowance of CENVAT credit on services related to trading of goods
The appellants, engaged in manufacturing hose pipes for the aeronautical industry, were found to have wrongly availed CENVAT credit on service tax paid for services related to trading of goods, which were exempted services. The audit revealed this violation of Rule 6(1) of the CENVAT Credit Rules, 2004. Although the appellants reversed the credit before the show-cause notice was issued, a penalty was imposed under Rule 15(2) read with Section 11AC of the Act. The Commissioner (A) confirmed the penalty and demand of interest for a specific period. The appellant contested this, arguing that the credit was not utilized during the period in question and relied on legal precedents to support their case.

Issue 2: Imposition of penalty under Rule 15(2) read with Section 11AC of the Central Excise Act
The Commissioner (A) upheld the penalty at 100% of the tax demand, leading to the appellant filing the present appeal. The appellant contended that the interest and penalty should not be applicable since the inadmissible credit was not utilized. The Revenue, however, defended the impugned order, stating that the appellants had availed and utilized inadmissible credit for a specific period, justifying the imposition of interest and penalties. The Tribunal found this material fact to be disputed and decided to remand the case to the original authority for verification and quantification of the inadmissible credit utilized during the disputed period, directing a fresh decision on the penalty to be imposed.

Issue 3: Dispute regarding availing and utilization of inadmissible credit during a specific period
The Tribunal allowed the appeal by remanding the case to ascertain whether the appellants had availed and utilized inadmissible credit during the disputed period. The original authority was tasked with verifying this fact and deciding on the penalty after affording the appellant an opportunity to provide supporting documents. The decision to remand the case was based on the necessity to clarify the disputed material fact, ensuring a fair and accurate determination of the penalty to be imposed based on the utilization of inadmissible credit.