2021 (7) TMI 162 - AT - Central Excise

Levy of penalty u/s 11AC of the Central Excise Act, 1944 read with Rule 15 Cenvat Credit Rules, 2004 - appellant has reversed the credit along with interest immediately on being pointed out by the department - suppression of facts or not - HELD THAT - The appellant has reversed the credit availed on Works Contract Service and Man-power Supply Service immediately on being pointed out by the department. The credit was reversed in 2014 along with applicable interest. The issue whether the credit is eligible or not is a legal issue. No positive evidence is brought to light that the appellant had any fraudulent intention to avail such credit. Though the department alleges suppression of facts, it has to be stated that the said availment of credit came to light from the accounts maintained by the appellant. The strong inference would be that the appellant reflected the availment of credit in their accounts and the allegation of suppression fails. The penalty under section 11AC cannot sustain - Appeal allowed - decided in favor of appellant.

Issues:
Penalty imposed under section 11AC of the Central Excise Act, 1944 read with Rule 15 Cenvat Credit Rules, 2004 for availing input service credit on Works Contract Service and Man-power Supply Service; Allegation of suppression of facts leading to penalty; Appeal against the penalty reduction by the Commissioner (Appeals) before the Tribunal.

Analysis:

Issue 1: Penalty Imposed under Section 11AC

The appellant availed input service credit on Works Contract Service and Man-power Supply Service, which was later found to be ineligible. The department observed this during an audit, leading to the reversal of credit by the appellant along with interest. A show-cause notice was issued after two years, alleging suppression of facts and proposing a penalty equal to the ineligible credit amount. The original authority confirmed the penalty, which was reduced by 50% by the Commissioner (Appeals). The appellant contended that the credit was availed under a bonafide belief of eligibility and was reversed promptly upon notification by the department. The Tribunal noted that no evidence of fraudulent intent was presented and that the appellant had reflected the credit in their accounts, indicating no suppression of facts. Consequently, the penalty under section 11AC was set aside, and the appeal was allowed.

Issue 2: Allegation of Suppression of Facts

The department alleged suppression of facts by the appellant for availing the ineligible credit. The Authorized Representative argued that the credit would not have come to light without the audit, indicating suppression. However, the Tribunal found that the appellant had promptly reversed the credit upon notification by the department, showing no fraudulent intent. The Tribunal further noted that the appellant's accounting records reflected the credit, undermining the allegation of suppression. As a result, the penalty was deemed unsustainable, and the appeal was allowed.

Issue 3: Appeal Before the Tribunal

The appellant appealed before the Tribunal challenging the penalty reduction by the Commissioner (Appeals). The appellant argued that the extended period for invoking penalty cannot be applied without willful suppression, citing relevant court decisions. The Tribunal agreed with the appellant, emphasizing the lack of evidence of fraudulent intent and the prompt reversal of credit by the appellant. Consequently, the Tribunal set aside the penalty under section 11AC and allowed the appeal with any consequential relief.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's reasoning leading to the decision to set aside the penalty imposed under section 11AC.

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