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2019 (10) TMI 167 - AT - Central ExciseCENVAT credit - input services or not - minimum take of pay (MTOP) charges - electricity charges - extended period of limitation - penalty - HELD THAT - As per the Product Supply Agreement dated 06.06.2005 between the appellant and M/s Praxair India Pvt. Ltd., the appellant is required to lift the particular quantity of gases and in the event of any failure on the part of the appellant to take products mentioned in Article 8.1, the appellant will be required to pay MTOP charges paid towards non-lifting of gases on which the Service Tax has been paid by the seller. Further, in the present case, MTOP charges are for the purpose of non-lifting of the goods and it is a fact that the goods have not been lifted by the appellant and they have not been received and used in the manufacturing activity or output services. Further, the said services were not used directly or indirectly by the appellant in the manufacturing activity and therefore there is no nexus between the said services and the final product produced by the appellant. Though the CBEC has issued Instruction dated 10.11.2014 but the said Circular also clarified that when the gases are used as inputs by another assessee, the admissibility of the credit of the duty paid will be decided in accordance with CCR, 2004. Extended period of limitation - HELD THAT - Taking of CENVAT credit on declared services is a matter of interpretation of law and therefore there is no justification invoking larger period alleging suppression of fact with malafide intention to evade tax. The demand for the normal period is confirmed - the demand invoking extended period of limitation set aside - case remanded back to the Original Authority for quantification of the demand for the normal period along with interest - Penalties under Rule 15 (1) and (2) of CCR, 2004 read with Section 11AC of the Central Excise Act, 1984 are also set aside. Appeal allowed in part by way of remand.
Issues Involved:
1. Eligibility of CENVAT credit on MTOP charges and electricity charges. 2. Invocation of the extended period of limitation. 3. Imposition of penalties under Rule 15 (1) & (2) of CCR, 2004 read with Section 11AC of CEA, 1944. Detailed Analysis: 1. Eligibility of CENVAT Credit on MTOP Charges and Electricity Charges: The appellants argued that MTOP charges and electricity charges paid to Praxair India Pvt. Ltd. should be considered as input services eligible for CENVAT credit. They cited Article 8.2 of the Product Supply Agreement, which stipulates compensatory payments for minimum take-or-pay (MTOP) obligations. They also referenced several legal precedents and a CBEC Circular clarifying that MTOP charges are linked with the manufacture and supply of gases. The Department contended that MTOP charges are paid for non-lifting of goods and do not qualify as input services under Rule 2(l) of CCR, 2004. They argued that these charges are not used directly or indirectly in the manufacturing process or for providing output services. The Tribunal found that MTOP charges are for non-lifting of goods and do not fall within the definition of input services. The charges were paid as liquidated damages and not used in the manufacturing activity. The Tribunal concluded that MTOP charges and corresponding electricity charges do not qualify as input services for the appellant. 2. Invocation of the Extended Period of Limitation: The appellants argued that the substantial demand is barred by limitation since the SCN was issued on 05.11.2014 for the period from September 2012 to February 2014. They contended that all transactions were recorded in their books of accounts and ER-1 Returns, and the issue of taking CENVAT credit on declared services is a matter of interpretation of law. The Department maintained that the extended period was rightly invoked due to suppression of facts by the appellant. The Tribunal found that the appellants had disclosed all transactions in their books and returns, and the issue was a matter of legal interpretation. Therefore, invoking the larger period alleging suppression of facts was not justified. 3. Imposition of Penalties: The appellants argued that penalties under Rule 15 (1) & (2) of CCR, 2004 read with Section 11AC of CEA, 1944 were not tenable since the Department could not establish suppression of facts. The Tribunal set aside the penalties, agreeing that there was no suppression of facts or malafide intention. Conclusion: The Tribunal confirmed the demand for the normal period and set aside the demand invoking the extended period of limitation. The case was remanded back to the Original Authority for quantification of the demand for the normal period along with interest. Penalties under Rule 15 (1) & (2) of CCR, 2004 read with Section 11AC of CEA, 1944 were also set aside.
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