2016 (12) TMI 327 - AT - Central Excise

Tribunal overturns order on CENVAT credit for consulting services, finding no suppression or fraud

M/s. Nelcast Ltd Versus CCE, Nellore

The Tribunal set aside the order upholding the demand, interest, and penalty on irregular availment of CENVAT credit for engineering consulting services. ... Demand - CENVAT credit - Engineering Consulting services - suppression of facts - Held that: - It is clear from the facts in the first round of litigation both the authorities below had held the issue in favour of appellant holding that appellant is eligible for credit. the judgment relied by appellant also, it was held that credit cannot be denied and that, at the most, it would be procedural lapse. Further there is no discrepancy with regard to the amount of credit availed or the service tax paid on such services. The error if any, is that instead of the appellant's second unit availing/utilizating the credit, the appellant has availed and utilized the credit. The submission made by the learned counsel for the appellant is that the situation is one revenue neutrality as the credit could have been availed by the second unit. Although Department contends that the contravention has come to light only on audit of records, it has to be again stated that on the issue whether appellant is eligible for credit there are divergent views as in the first round of litigation both the authorities held that appellant is eligible for credit. Further as per the definition of input service, the manufacturer is eligible to take credit and not the factory. Therefore the error, if any, is only procedural lapse which cannot be concluded to be suppression or misrepresentation of facts with intent to evade payment of duty. In view thereof, I am of the view that there is no evidence to establish any positive act on the part of the appellant for suppression, fraud or misrepresentation of facts with intent to evade payment of duty. CENVAT credit allowed - appeal allowed - decided in favor of appellant. Issues:Challenge to order upholding demand, interest, and penalty on irregular availment of CENVAT credit for engineering consulting services.Analysis:The appeal challenges the order passed by the Commissioner(Appeals) upholding the demand, interest, and penalty on the irregular availment of CENVAT credit for engineering consulting services. The appellant, engaged in manufacturing, was issued a show-cause notice for allegedly irregularly availing credit for setting up their second unit. The original authority allowed the credit, but the Department appealed. The Tribunal, in a previous order, remanded the issue for de novo adjudication on the limitation aspect due to a plea of limitation raised by the appellant. In the subsequent adjudication, the original authority confirmed the demand, interest, and penalty, alleging misrepresentation of facts. The Commissioner(Appeals) upheld this decision, citing suppression of fact by the appellant.In the present appeal, the appellant argued that there was no irregularity in the credit availed, as it was done under a bona fide belief of admissibility. The appellant contended that there was no suppression, fraud, or willful misstatement, as they had disclosed the credit in their returns. The appellant relied on a precedent to support their claim that the credit was admissible, and any error was merely a procedural lapse. On the other hand, the Department argued that the appellant was guilty of suppression of facts, as the irregular credit came to light during an audit. The Department claimed that the demand raised within the extended period of limitation was valid due to this suppression.The Tribunal, after hearing both sides, focused on whether the appellant was guilty of suppression, fraud, or misrepresentation to evade duty payment. The Tribunal noted that in the previous litigation rounds, both authorities had ruled in favor of the appellant's credit eligibility. It was highlighted that any error was related to the utilization of credit by the appellant instead of the second unit, leading to revenue neutrality. The Tribunal found that the situation did not indicate any positive act of suppression, fraud, or misrepresentation by the appellant. Consequently, the impugned order upholding the demand, interest, and penalty was set aside, and the appeal was allowed with consequential reliefs, if any.