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2018 (5) TMI 1408 - AT - Central ExciseCENVAT credit - input services - construction service - denial on account of nexus - place of removal - Held that - with regard to the definition of input service pertains to modernization, renovation or repairs of the factory qualifying as input service under the inclusive clause of Rule 2 (l) of CCR, 2004 - in the present case the assessee had availed the construction services of repair of the factory which was based on input service invoices. Thus, it is a clear case where two views are possible as observed by the ld. Asst. Commissioner. Penalty - Held that - It is a clear case of bonafide mistake in availing Cenvat credit for which no penalty is exigible. Appeal disposed off.
Issues:
1. Disallowance of Cenvat credit on input services for repair and maintenance of factory premises. 2. Appropriation of reversed Cenvat credit towards the demanded amount. 3. Demand for interest on disallowed Cenvat credit. 4. Imposition of penalty under Section 11AC of the CEA, 1944. Analysis: Issue 1: Disallowance of Cenvat credit on input services for repair and maintenance of factory premises The dispute arose when the Revenue alleged that the services availed by the appellant for repair and maintenance of the factory premises were in the nature of construction services and not directly related to the manufacturing process. The appellant argued that they availed the credit under a bonafide belief of eligibility and reversed it upon audit notification. The adjudicating authority found the credit wrongly availed but noted the immediate reversal as evidence of bonafide intentions. The authority interpreted 'input service' to include services for modernization, renovation, or repairs of a factory. Citing Supreme Court decisions, the authority held that no penalty is imposable for a bonafide mistake in availing Cenvat credit, concluding that the appellant did not deserve to be penalized. Issue 2: Appropriation of reversed Cenvat credit The Revenue proposed to appropriate the amount reversed by the appellant towards the demanded sum. However, the appellant's timely reversal of the credit before the issuance of the show cause notice indicated a bonafide mistake, leading to the adjudicating authority's decision not to impose a penalty. Issue 3: Demand for interest on disallowed Cenvat credit The Revenue sought interest on the disallowed Cenvat credit. The appellant argued that all relevant information was provided to the department in a timely manner, and there was no evidence of suppression. The adjudicating authority, considering the appellant's bonafide intentions and the immediate reversal of credit, did not find merit in imposing interest, aligning with Supreme Court decisions that no penalty is imposable for a bonafide mistake. Issue 4: Imposition of penalty under Section 11AC of the CEA, 1944 The Commissioner (Appeals) overturned the adjudicating authority's decision not to impose a penalty, stating that the appellant did not disclose the availed Cenvat credit on construction services. However, the appellate tribunal noted that the appellant's bonafide mistake in availing the credit, the immediate reversal, and the absence of evidence supporting non-disclosure justified the restoration of the original decision not to levy a penalty. In conclusion, the tribunal upheld the bonafide nature of the appellant's actions, emphasizing the absence of evidence supporting non-disclosure or intentional wrongdoing. The decision rested on the interpretation of 'input service,' the immediate reversal of credit upon audit notification, and established legal principles regarding penalties for bonafide mistakes in availing Cenvat credit.
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