2018 (7) TMI 1336 - AT - Central Excise

Demand of Interest and penalty - CENVAT Credit availed in respect of common services, which were relatable to their second unit, which was not a registered ISD, is reversed - Held that - Reliance placed in the case of CCE & ST, LTU Vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT , where it is held that if the excess credit availed remained as paper entry and was not utilised, no interest liability would arise. Penalty - Held that - This is a case of bona fide availment of credit and inasmuch as the issue also stands decided in favour of the assessee, it cannot be held to be a case of any mala fide so as to attract penal provisions - penalty also not warranted. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat credit based on invoices from head office for common services related to a second unit.
2. Initiation of proceedings for confirmation of interest and imposition of penalty.
3. Interpretation of Tribunal's decision in Doshion Ltd. case regarding credit distribution without ISD registration.
4. Applicability of interest liability based on unutilized credit per Karnataka High Court's decision.
5. Imposition of penalty in the absence of mala fide intentions.

Analysis:
1. The appellant availed Cenvat credit during April 2011 to July 2012 based on invoices from their head office, including credit for common services related to their second unit. However, since the head office was not a registered Input Service Distributor (ISD) at that time, the Revenue contended that credit for services related to the other unit could not be availed. Consequently, the appellant reversed the credit proportionately belonging to the other unit.

2. Proceedings were initiated against the appellant for confirmation of interest and imposition of penalty due to the above issue. The appellant did not challenge the demand, leading to the present impugned orders.

3. The appellant's advocate referred to the Tribunal's decision in the Doshion Ltd. case, emphasizing that distributing credit without ISD registration may not be irregular. Although the Commissioner (Appeals) extended the benefit for a subsequent period, the appellant did not contest the confirmation before the lower authorities, limiting their ability to challenge it before the Tribunal. The advocate focused on contesting the confirmation of interest and imposition of penalties.

4. Regarding interest liability, the appellant argued that no interest should apply as the unutilized credit did not result in any liability, citing the Karnataka High Court's decision in the CCE & ST, LTU Vs. Bill Forge Pvt. Ltd. case. The Tribunal considered this argument and set aside the confirmation of interest based on relevant legal precedents.

5. The Revenue's representative reiterated their findings, but the Tribunal upheld the confirmation of the demand while setting aside the interest and penalty. The Tribunal reasoned that since the excess credit remained unutilized and the issue was decided in favor of the appellant, there was no mala fide intent to attract penal provisions. Therefore, the Tribunal disposed of the appeal by confirming the demand but eliminating the interest and penalty.

This detailed analysis of the judgment covers the issues involved and the Tribunal's decision on each aspect, providing a comprehensive overview of the legal proceedings and outcomes.