2019 (1) TMI 814 - AT - Central Excise

CENVAT Credit - reversal of credit with penalty - requirement to issue SCN imposing penalty - sub-section (6) of Section 11(A) of CEA - input services - environment and pollution control - tour operator and architect - design engineering services - Held that - It is an admitted fact on record that out of the CENVAT demand of ₹ 14,62,89/-, the appellant had reversed ₹ 8,68,069/- and the said amount had also been appropriated in the adjudication order. Further, as per the requirement of Section 11A(6) of the Act, the appellant also paid penalty @ 1% of the amount of CENVAT credit reversed by it. Since the appellant had already paid the penalty as per the mandate of sub-section (6) of Section 11(A), there was no requirement of issuance of any show cause notice with regard to the amount of CENVAT credit reversed by the appellant - penalty set aside. CENVAT Credit - input services - environment and pollution control service - Held that - Tribunal in the case of ESAB India Ltd. has extended the CENVAT benefit on such service, holding that prevention of pollution within the factory premises is a statutory requirement and credit of service tax paid on such service should be available to the manufacturer - credit allowed. CENVAT Credit - input services - Tour Operator Service - Held that - The impugned order that such service was availed by the appellant for sending its dealers to outside country on pleasure trip. Since such service is not specifically finding place in the definition of input service under Rule 2(1) ibid, denial of CENVAT credit benefit on Tour Operator Service by the authorities below, is proper and justified - credit not allowed. CENVAT Credit - input services - architect service - Held that - Architect service has been specifically defined under the Finance Act and works contract/construction service have also been separately defined therein. Since architect service is distinct service and such service is not specifically included in the exclusion part of the definition of input service , denial of CENVAT credit on such service is not legal and proper - credit allowed. Appeal allowed in part.

Summary

Issues:
1. Appeal against order passed by Commissioner of Central Excise
2. Availment of irregular CENVAT credit
3. Reversal of CENVAT credit and penalty imposition
4. Consideration of various services as input services for CENVAT credit
5. Adjudication of CENVAT demand and penalty imposition
6. Legal interpretation of input services for CENVAT credit

Analysis:
1. The appeal was directed against the order passed by the Commissioner of Central Excise, Pune, regarding the irregular availment of CENVAT credit by the appellant, a manufacturer of excisable goods. The audit wing observed irregular credit availed by the appellant, leading to a demand of ?14,63,898. The appellant reversed a portion of the credit and paid the penalty, with a dispute arising over the remaining amount.

2. The department confirmed the CENVAT credit demand and imposed penalties, which was upheld by the Commissioner (Appeals). The appellant argued that since they had already reversed a significant amount and paid penalties, imposing further penalties was unjustified. The appellant contended that certain services like environment and pollution control, tour operator, and architect services should be considered as input services for CENVAT credit.

3. The Tribunal found that the appellant had complied with the penalty requirements under the Central Excise Act and that imposing additional penalties was unwarranted. Regarding the environment and pollution control service, the Tribunal referred to a previous case to support the availability of CENVAT credit for such services. However, the Tribunal denied CENVAT credit for tour operator services as they were not considered within the scope of input services.

4. The Tribunal further analyzed the architect services utilized by the appellant for construction purposes. It determined that architect services were distinct and not excluded from the definition of input services, thus ruling in favor of allowing CENVAT credit for such services. The judgment concluded by setting aside the penalty, confirming CENVAT demand on tour operator services, and allowing CENVAT credit for environment and pollution control, as well as architect/design engineering services.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the Tribunal's decision on each aspect of the case.