2021 (9) TMI 1099 - AT - Central Excise

CENVAT Credit - input services - Group Medical insurance Policy for its employees and their family members - scope of amended definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - malafide intention on the part of the Appellant, or not - suppression of facts or not - invocation of extended period of limitation - Penalty - HELD THAT - Rule 2(l), CCR, 2004 has been amended w.e.f. 1.4.2011 and from that date insurance has been brought under the exclusion clause and there is no ambiguity/confusion in understanding the said definition of input service after 1.4.2011 - Since w.e.f. 1.4.2011 the service in issue clearly falls in the excluded category, therefore the Cenvat credit availed on these services is inadmissible to the Appellant whether without any additional premium or even if it is attributable to the family members only. When the language of the rule is clear and unambiguous and despite that assessee is not doing his part of obligation then the malafide is apparent and it cannot be termed as bonafide mistake. Therefore the extended period has rightly been invoked by the authorities concerned. The issue to be considered is whether the relevant information was placed before the department earlier and if so in what form, whether in a manner from which the issue at hand was clearly discernible to the department. The provision in the rule relevant to the credit taken is very clear and simple and easy to understand. The very fact that the assessee has taken proportionate credit by adopting their own interpretation without intimation to department would justify to consider this as a case of mis-representation and suppression to invoke extended period for demanding the excess credit availed. Penalty - whether penalty can be reduced to 25% when credit admittedly was reversed before the issuance of show cause notice and interest and penalty was paid within 30 days from the date of the receipt of Adjudication Order? - HELD THAT - It is not disputed that the demand confirmed in the adjudicating order amounting to ₹ 7,69,054/- was paid by the appellants on 18.1.2013 22.1.2013 respectively i.e. well before the issuance of the show cause notice and the interest thereon of ₹ 1,84,043/- alongwith 25% penalty amounting to ₹ 1,92,264/- was also paid by the appellants on 14.2.2017 i.e. within 30 days period from the date of communication of the Order-in-Original dated 30.12.2016 (issued on 13.1.2017), which was received by the appellants only on 15.1.2017 - this relief can be granted to the appellants and accordingly the penalty is reduced to 25% which, as submitted by learned counsel, has already been deposited by the appellant. Appeal allowed in part.

Summary

Issues involved:
Whether the Appellants are eligible to avail Cenvat Credit of service tax on Group Medical insurance Policy for its employees and their family members w.e.f. 1.4.2011 under Rule 2(l) of Cenvat Credit Rules, 2004, and if there was any malafide intention on the part of the Appellant.

Detailed Analysis:

Issue 1: Eligibility for Cenvat Credit on Group Medical insurance Policy:
The Appellants, engaged in manufacturing and sale of goods, availed credit of service tax on Group Medical insurance Policy for employees and their family members from 2008-09 to 2012-13. The Revenue contended that this credit was not admissible under Rule 2(l) of Cenvat Credit Rules, 2004, as it had no nexus with manufacturing activities. The Adjudicating Authority upheld the demand, which was partly allowed on appeal for the period prior to 1.4.2011. The Appellants argued that since the premium did not vary with the number of dependents, Cenvat Credit should be allowed. However, the Tribunal held that post-amendment in 2011, insurance was excluded from 'input service,' making the credit inadmissible, regardless of additional premium or beneficiaries. The Tribunal found the Appellant's interpretation misleading and invoked the extended period due to misrepresentation and suppression.

Issue 2: Scope of Show Cause Notice:
The Appellant challenged that the lower authorities exceeded the show cause notice's scope. However, the Tribunal found that the notice explicitly referred to Rule 2(l) defining 'input service,' and the authorities acted within its purview. Even though the exclusion clause was not explicitly mentioned, it was considered part of the rule itself, justifying the authorities' reliance on it.

Issue 3: Penalty Reduction:
Regarding the penalty, the Tribunal considered whether it could be reduced to 25% given that the credit was reversed before the notice, and interest/penalty was paid within 30 days of the Adjudication Order. The Tribunal acknowledged the timely payments made by the Appellants and reduced the penalty to 25% accordingly, granting relief based on the specific circumstances of the case.

In conclusion, the Tribunal partly allowed the appeal by reducing the penalty to 25%, emphasizing compliance with the amended Cenvat Credit Rules post-2011 amendment and the importance of timely payments in penalty considerations.