2018 (3) TMI 751 - AT - Central Excise

Penalty u/s 11AC - CENVAT credit - input service attributed to trading activity of goods - Held that - As per the entire facts, the issue of Cenvat credit disputed in the SCN has been settled in favour of appellant except small portion of Cenvat credit which is related to common input service attributed to the trading of goods - Both the SCN were issued in the normal period for the reason that facts were very much disclosed by the appellant and case was made out on that basis only therefore no suppression involved - penalty set aside - appeal allowed.

Summary

Issues Involved:
Appellant's entitlement to Cenvat credit on various input services attributed to trading activity of goods and waiver of penalty imposed under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944.

Analysis:

The judgment by the Appellate Tribunal CESTAT MUMBAI delves into the issue of the appellant's eligibility for Cenvat credit on input services related to both manufacturing and trading activities. The appellant sought relief from the penalty imposed under Rule 15 of Cenvat Credit Rules, 2004, along with Section 11AC of the Central Excise Act, 1944. The appellant's appeal focused solely on the penalty waiver amounting to &8377; 303711/-.

The appellant's counsel argued that after a thorough legal process, it was established that the services for which Cenvat credit was availed were indeed admissible as input services. However, a portion of the credit was disallowed due to the trading of goods, raising an interpretation issue regarding Rule 6 of the Cenvat Credit Rules, 2004. The appellant emphasized the absence of any malafide intent, highlighting that the show cause notices were issued based on disclosed facts from the appellant's records and returns, thus negating any suppression of information.

In contrast, the Revenue representative reiterated the findings of the initial order. Upon careful consideration of both parties' arguments and a review of the case records, the Member (Judicial) concluded that the primary issue at hand was the penalty under Section 11AC. The Tribunal acknowledged that the Cenvat credit dispute was resolved in favor of the appellant, except for a minor portion related to common input services linked to trading activities. Since the show cause notices were issued within the normal period and based on disclosed facts, the Tribunal found no grounds for imposing a penalty under Section 11AC.

Ultimately, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Section 11AC. The decision was based on the absence of any suppression of facts, the settlement of the Cenvat credit issue, and the lack of grounds for penal action. The judgment emphasized the importance of factual disclosure and the absence of malafide intent in the appellant's case, leading to the waiver of the penalty under Section 11AC.