2019 (8) TMI 1683 - AT - Central Excise

CENVAT Credit - mining and manufacture of bulk lead and zinc concentrates - penalty under Rule 15 (2) of the Cenvat Credit Rules 2007 - extended period of limitation - penalty - HELD THAT - The issue is wholly interpretational in nature. The appellant has maintained proper records of their transactions and the credit taken is based on the proper input service invoices. Further the appellant on being so pointed out by the Department reversed the substantial amount of cenvat credit along with interest before issue of show cause notice. They have further reversed the substantial amount during the pendency of the appeal before the Commissioner (Appeals) amounting to Rs. 6, 27, 513/- which was contested before the Commissioner (Appeals). Extended period of limitation - HELD THAT - The conditions precedent for invoking the extended period of limitation are not available to Revenue - demand for the period till July 2014 is set aside. Penalty - HELD THAT - There is no contumacious conduct nor preconditions for imposition of penalty. Appeal allowed in part.

Summary

Issues:
1. Denial of cenvat credit taken by the appellant
2. Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2007
3. Invocation of the extended period of limitation in the show cause notice

Analysis:

Issue 1: Denial of Cenvat Credit
The appellant, engaged in mining and manufacturing of bulk lead and zinc concentrates, was found to have wrongly taken credit of Service Tax on Industrial and Civil Construction Service. The audit revealed that the services availed did not fall under the definition of "input service" as per the Credit Rules. The appellant had availed a significant amount of credit on services unrelated to their final product, indicating willful suppression of facts. The extended period of limitation was invoked due to this willful act of wrongly availing Cenvat Credit.

Issue 2: Imposition of Penalty
The show cause notice demanded the reversal of wrongly availed cenvat credit, proposing to charge interest and impose a penalty under Rule 15(2) of the Cenvat Credit Rules. The penalty was confirmed in the ex parte order-in-original, but upon appeal, the Commissioner (Appeals) reduced the penalty to 50% of the credit amount. The appellant contested the penalty, citing proper record maintenance and cooperation with the Department during audits.

Issue 3: Extended Period of Limitation
The Tribunal considered the appellant's maintenance of proper transaction records and the reversal of a substantial amount of cenvat credit upon being pointed out by the Department. The Tribunal found that the conditions for invoking the extended period of limitation were not met, setting aside the demand for the period till July 2014. Additionally, the Tribunal found no contumacious conduct or grounds for imposing the penalty under Rule 15(2) of the Cenvat Credit Rules, ultimately setting aside the penalty.

In conclusion, the Tribunal allowed the appeal in part, setting aside the demand for the period till July 2014 and the penalty under Rule 15(2) of the Cenvat Credit Rules. The judgment highlighted the importance of proper record-keeping, cooperation with authorities, and the lack of contumacious conduct in determining the outcome of the case.