2021 (6) TMI 715 - AT - Central Excise

CENVAT Credit - input services - Air Travel Charges - Canteen Services - Expenses incurred for hiring furniture for the guest house - Service of subscription of periodicals - lack of application of mind on the part of the respondent - learned Commissioner also ignored few aspects - principles of natural justice - compliance with the pre-deposit - Levy of interest - penalty - HELD THAT - This is third round of litigation and the demand which was initially made in the first show-cause notice was Rs. 4, 73, 88, 162/- and reduced to Rs. 33, 248/- in the impugned order after two rounds of litigation which clearly shows the complete lack of application of mind on the part of the respondent - Further the learned Commissioner has completely ignored the fact that for the previous period from December 2007 to February 2009 the Commissioner vide Order-in-Original No.10/2013 dt. 27.02.2013 has allowed the credit availed in all the cases in toto without disputing the validity of the credit taken in each of the cases and the Department did not file appeal and accepted the decision of the Commissioner. The learned Commissioner has failed to appreciate that the period involved in the present appeal pertains to March 2010 to October 2010 during that time the definition of input service had a wide connotation and it is only after the amendment in the definition of input service w.e.f. 01.04.2011 the scope of the input service has been restricted to some extent by creating certain exclusions. Air Travel Charges - HELD THAT - The same has been used for the purpose of business trips undertaken by the company officials /guests for business related purposes and the same has been held to be input service in the case of Arm Embedded Technologies Pvt. Ltd. Vs. CCE Cus ST Bangalore 2016 (7) TMI 1207 - CESTAT BANGALORE - Credit allowed. Canteen Services - HELD THAT - The outdoor catering was held to be input service prior to 01.04.2011 and during the disputed period the same fall in the definition of input service - credit allowed. Expenses incurred for hiring furniture for the guest house - HELD THAT - The said services also fall under the definition of input service as the guest house is used for business purposes - credit allowed. Service of subscription of periodicals - HELD THAT - The cenvat credit availed in relation to service of subscription of periodicals is an input service. The Department without seeking any clarification/submission chose to take soft option of confirming demand without going into merits - Credit is allowed. Compliance with the pre-deposit - HELD THAT - The appellant in compliance of the Final Order deposited Rs. 5 lakhs on 14/08/2014 but the learned Commissioner in spite of two reminders by the appellant took nearly six years to pass the impugned order which speaks volumes on how the matter has been dealt by the Department causing unnecessary harassment to the appellant which is a public sector undertaking and is a big revenue contributor in the jurisdiction of Mangalore - for the subsequent period having the same issue the Department completely dropped the demand in the show-show cause notice for the amounts Rs. 4, 13, 60, 093/- for the period October 2011 to June 2012. Levy of Interest - HELD THAT - In the present case it is not disputed that the appellant has not utilized the cenvat credit and reversed the same as soon as it was pointed out and the fact of availing of cenvat credit was very much in the knowledge of the Department because the appellant has been filing the returns regularly so the interest is not payable. Levy of Penalty - HELD THAT - he decision of the Supreme Court in the case of Uniworth Textiles Ltd. cited supra will apply in this case also. In the said case Hon ble Supreme Court has elucidated that the burden of proof to establish the malafide rest heavily with the person who is alleging the malafide. The appellant being a public sector undertaking cannot be attributed to have a malafide intention or mens rea to evade the payment of taxes - Penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Disallowance and recovery of Cenvat credit.
2. Confirmation of demand and recovery of duty.
3. Imposition of interest and penalty.

Detailed Analysis:

1. Disallowance and Recovery of Cenvat Credit:
The Commissioner of Central Tax, Mangalore, confirmed the disallowance and ordered the recovery of Cenvat credit amounting to Rs. 33,248/- under Rule 14 of the CCR, 2004, and Section 11A of the Central Excise Act, 1944. The appellant contested this decision, arguing that the impugned order was passed without properly appreciating the facts, law, and binding judicial precedent. The appellant highlighted that the definition of input service during the disputed period (March 2010 to October 2010) had a wide connotation and included services availed in relation to the business of the assessee. The Tribunal found that the services in question, such as air travel charges, canteen services, hiring furniture for guest houses, subscription of periodicals, cable operator services, and vehicle repair services, were indeed input services as per various judicial decisions and allowed the Cenvat credit.

2. Confirmation of Demand and Recovery of Duty:
The initial demand was Rs. 4,73,88,162/-, which was reduced to Rs. 33,248/- after two rounds of litigation. The Tribunal noted that the Department's repeated failure to properly appraise the facts led to unnecessary harassment of the appellant. The Tribunal also observed that for the previous period (December 2007 to February 2009), the Commissioner had allowed the credit availed in all cases without disputing the validity of the credit taken, and the Department did not challenge this decision. This inconsistency in the Department's approach further weakened its case. The Tribunal set aside the impugned order, noting that the earlier Order-in-Original had merged with the Tribunal's Final Order and ceased to exist in law.

3. Imposition of Interest and Penalty:
The Tribunal found that the appellant had reversed the Cenvat credit without utilizing it and had sufficient balance in their Cenvat credit account, making the demand for interest and penalty unjustified. The Tribunal relied on the Karnataka High Court's decision in CCE&ST, LTU, Bangalore Vs. Bill Forge Pvt. Ltd., which held that reversal of Cenvat credit amounts to non-taking of credit, and hence interest is not applicable. Additionally, the Tribunal noted that the appellant, being a public sector undertaking, could not be attributed to have a malafide intention or mens rea to evade payment of taxes. The Tribunal cited the Supreme Court's decision in Uniworth Textiles Ltd., emphasizing that the burden of proof to establish malafide rests with the person alleging it. Consequently, the Tribunal set aside the imposition of penalty.

Conclusion:
The Tribunal allowed the appeal of the appellant, setting aside the impugned order, and provided consequential relief as per law. The Tribunal's decision was pronounced in Open Court on 18/06/2021.