2023 (7) TMI 1114 - AT - Central Excise

CENVAT Credit - input services - Insurance Services (Vehicle Insurance Life Insurance) - Civil Work - period from April 2010 to October 2012 - history of amendments made in Rule 2 (l) of CCR - extended period of limitation - penalty - Requirement of notice as per section 11 (A) (2) of the Central Excise Act, 1944 - HELD THAT - While adjudicating authority has in his order referred to the definition as it existed during the period prior to 01.04.2011, Commissioner (Appeal) has referred to the amended definition as it existed subsequently for upholding the order of the original authority. Rule 2(l) of the CENVAT Credit Rules, 2004 as it was first incorporated in the CENVAT Credit Rules, 2004, by the Notification No 24/2004-(NT) dated 17.09.2004 - Admittedly, in the present case, the concern is with CENVAT Credit taken by the appellant during the period to the amendments made with effect from 01.04.2011. The reliance placed by the Commissioner (Appeal) on the exclusion clause as inserted in the definition of input services, in Rule 2 (l), is totally uncalled for and unjustified. Both show cause notice and Order-in-Original seek to deny the CENVAT credit in respect of insurance services for the reason that these services are not used in Appellant in or in relation to manufacture of the finished goods. It is also observed that no ground for denial of CENVAT Credit in respect of construction services has been indicated either in the show cause notice or in the Order-in-Original. It is only in the order of the appellate authority that the ground for denial of CENVAT credit on the construction services is put forth, by stating that it falls within the exclusion clause - it is arriving at a loss to make out as to what quantum of CENVAT Credit sought to be denied in respect of life insurance services and what is quantum in respect of construction services. There are no finding recorded by the Commissioner (Appeals) in his order in respect of submission made by the appellant, if Cenvat Credit has been allowed in respect of the same services to the other assessee s there is no justifiable reason for denying the same to the present appellant - The show cause notice should not have been issued to the appellant. It is observed that after the lapse of a considerable time after the audit, revenue proceeded to issue this show cause notice invoking suppression of facts. What is the reason for invoking suppression or other ingredients required for invoking an extended period in this case - no ground existed for invoking the extended period of limitation in the present case. Since the extended period could not have been invoked, the show cause notice itself could not have been issued and the matter should have been settled on the basis of the amount reversed by the appellant. Penalty imposed under Rule 15 of the CENVAT Credit Rules, 2004 read with section 11 AC of the Central Excise Act, 1944 - HELD THAT - Impugned order has held in favour of the penalty imposed. As there are no merits in the invocation of the extended period of limitation as per Section 11A (4) of the Central Excise Act, 1944, the penalty imposed also set aside. Requirement of notice as per section 11 (A) (2) of the Central Excise Act, 1944 - HELD THAT - In absence of any concrete reasons to invoke extended period of limitation there is no reason why this subsection should have not been invoked by the revenue for not issuing any show cause notice to the appellant. It is quite evident that impugned order cannot be sustained on any of the grounds - Appeal allowed.

Summary

Issues Involved:
1. Denial of Cenvat Credit on input services.
2. Invocation of the extended period under Section 11-A(4) of the Central Excise Act, 1944.
3. Imposition of interest and penalty under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11-AC of the Central Excise Act, 1944.

Summary of Judgment:

1. Denial of Cenvat Credit on Input Services:
The appellant availed Cenvat Credit on input services like Insurance Services (Vehicle Insurance & Life Insurance) and Civil Work amounting to Rs. 67,022/- for the period from April 2010 to October 2012. The Revenue contended that these services were not admissible for Cenvat Credit. The Commissioner (Appeals) upheld the Order-in-Original, which confirmed the demand for Rs. 67,022/- and imposed a penalty of an equivalent amount. The definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004, as amended from 01.04.2011, excluded services related to construction and personal use such as life insurance.

2. Invocation of the Extended Period under Section 11-A(4):
The show cause notice was issued on 14.07.2015, invoking the extended period under Section 11-A(4) of the Central Excise Act, 1944, on the grounds that the appellant did not submit CENVAT Credit returns as required. The Tribunal found no valid grounds for invoking the extended period, noting that the appellant had reversed the credit and paid the interest before the issuance of the show cause notice. The Tribunal observed that the show cause notice should not have been issued as the appellant was in constant communication with the department.

3. Imposition of Interest and Penalty:
Interest and penalty were imposed under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11-AC of the Central Excise Act, 1944. The Tribunal, referencing the Supreme Court's judgment in Rajasthan Spinning and Weaving Mills, held that penalty under Section 11AC is applicable only in cases of intentional evasion of duty. Since the extended period was not justifiably invoked, the penalty was set aside. The Tribunal emphasized that the appellant's reversal of credit and payment of interest should have precluded the issuance of the show cause notice.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order on the grounds that the denial of Cenvat Credit, invocation of the extended period, and imposition of penalty were not justified. The operative part of the order was pronounced in open court.