2018 (12) TMI 1173 - AT - Central Excise

Penalty - CENVAT Credit - common input services for both manufacturing and trading activities - no separate accountal of utilization - rule 6 of CENVAT Credit Rules, 2004 - Held that - In view of the consistent stand of the Tribunal on the test of evidence for pre-supposing intent to evade duty, the circumstances pertaining to impugned availment of credit of tax paid on input services used for exempted activities, such as trading, in the various decisions cited by Learned Counsel and the specific circumstances in which the High Courts and Hon ble Supreme Court has enforced the penal provisions, we set aside the penalty imposed in the impugned order - appeal allowed.

Summary

Issues:
1. Availment of CENVAT credit without separate accountal for trading activities.
2. Recovery of tax, interest, and penalty under the Central Excise Act, 1944.
3. Appropriateness of invoking section 11AC of Central Excise Act, 1944.
4. Interpretation of 'trading' as an exempted service.
5. Precedents regarding penalty imposition under section 11AC.
6. Discharge of liability before the issue of show cause notice.
7. Eligibility of input services used for trading to CENVAT credit.

Analysis:

1. The appellant, a manufacturer and trader of electronic goods, availed CENVAT credit without separate accountal for trading activities, leading to the dispute. The Commissioner confirmed recovery of tax, interest, and penalty under the Central Excise Act, 1944.

2. The dispute revolved around the recovery of tax, interest, and penalty under the Central Excise Act, 1944. The appellant contended that the irregular credit was rectified before the issue of the show cause notice, while the Revenue argued that the restitution was made only after an audit.

3. The main issue was the appropriateness of invoking section 11AC of the Central Excise Act, 1944, considering the discharge of liability along with interest before the issuance of the show cause notice.

4. The interpretation of 'trading' as an exempted service was debated, with the appellant citing precedents to argue against the imposition of penalty under section 11AC based on the timing of the amendment and the inability to isolate services used for trading.

5. Precedents regarding penalty imposition under section 11AC were discussed, with the appellant relying on decisions where penalties were not imposed in similar circumstances, while the Revenue cited judgments emphasizing the relationship between penalty imposition and recovery under the Act.

6. The appellant discharged the liability along with interest before the show cause notice was issued, leading to a discussion on the relevance of this action in the context of penalty imposition under the Central Excise Act, 1944.

7. The eligibility of input services used for trading to CENVAT credit was analyzed, with the Tribunal setting aside the penalty imposed in the impugned order based on the consistent stand on the evidence required to presume intent to evade duty and the specific circumstances of the case. The appeal was allowed to that limited extent.