2014 (3) TMI 879 - AT - Central Excise

Denial of CENVAT Credit - Denial on the ground that the invoices are in the name of their head office - Commissioner (Appeals) held that the respondents would be entitled to the credit of commission paid to the sole selling agents, where the paper was excisable - However, demand of which the respondents had already reversed was upheld - Held that - no infirmity can be found in the order of the Commissioner (Appeals). However, as regards the contention of the Revenue is that admittedly CENVAT credit of Rs.5,52,226/- stands denied to the respondents, who have also not challenged the same, penalty to the extent of 100% should have been imposed. As such, the prayer to enhance the penalty. Entire credit was taken by the respondent on statutory record and they were filing the returns to the Department. In as much as the issue involved is of legal interpretation, no mala fide can be attributed to the respondents so as to impose 100% penalty upon them. In my views, even imposition of penalty of Rs.10,000/- is not called for, but in as much as the respondents have not challenged the said order, by way of filing a separate appeal, the same cannot be set aside - Decided against Revenue.

Summary

Issues:
1. Availing CENVAT credit on commission paid to sole selling agents for exempted services.
2. Denial of service tax credit on insurance services.
3. Imposition of penalty for excess CENVAT credit availed.

Analysis:
1. The case involved the appellant challenging an order by the Commissioner (Appeals) regarding the availment of CENVAT credit on commission paid to sole selling agents for exempted services. The respondents, engaged in manufacturing paper and chemicals, were issued a Show Cause Notice for allegedly availing the benefit of commission paid to sole selling agents, which was not entitled due to exemption on some papers. The respondents accepted part of the liability and reversed the amount even before the notice was issued. The Commissioner (Appeals) upheld the reversal of Rs.5,52,226/- but allowed credit of Rs.1,34,551/- paid to sole selling agents for excisable paper. The appellate tribunal, in agreement with the Commissioner, held that credit for commission on exempted services was not available, while credit for taxable services was permissible.

2. Another issue in the judgment was the denial of service tax credit amounting to Rs.14,86,624/- on insurance services covering plant and machinery. The tribunal referred to a previous case law to establish that insuring plant and machinery against various risks falls under the definition of input services as per the CENVAT Credit Rules, 2004. Therefore, the tribunal found no basis to deny the service tax credit on insurance services, aligning with the established legal interpretation.

3. The final issue addressed in the judgment was the imposition of a penalty for the excess CENVAT credit availed by the respondents. The tribunal noted that although the respondents had not challenged the denial of Rs.5,52,226/- credit, the imposition of a 100% penalty was unwarranted. The tribunal reasoned that the respondents had voluntarily reversed the excess credit before the Show Cause Notice was issued, and there was no evidence of mala fide intentions. Considering the issue as a matter of legal interpretation, the tribunal concluded that even a penalty of Rs.10,000/- was unnecessary. However, since the respondents did not challenge the penalty separately, the tribunal could not set it aside, ultimately rejecting the Revenue's appeal.

In conclusion, the judgment upheld the Commissioner (Appeals) decision regarding the availment of CENVAT credit on commission, allowed the service tax credit on insurance services, and deemed the penalty imposition excessive in the absence of malicious intent from the respondents.