2016 (12) TMI 708 - AT - Central Excise

Appeal Dismissed: Cenvat Credit Demand Set Aside for Transportation Services

The department's appeal challenging the order setting aside the demand for interest and penalty on irregularly availed Cenvat credit for transportation ... Extended period of limitation - ailing input services for transportation of inputs/capital goods into their factory - manufacture of exempted goods - Held that: - The assesse has reversed the irregularly availed credit before utilisation. The same was reversed prior to issuance of show cause notice. The issue is whether the assessee is liable to pay interest when the credit is reversed before utilisation. The issue is settled in the cases of COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX LARGE TAXPAYER UNIT, BANGALORE Versus M/s BILL FORGE PVT LTD, BANGALORE [2011 (4) TMI 969 - KARNATAKA HIGH COURT], Strategic Engg. Ltd. Vs CCE, Madurai [2014 (11) TMI 89 - MADRAS HIGH COURT]. The Hon’ble High Court of Karnataka and Madras, in the above decisions have referred to the judgment laid in Ind-Swift Labs case [2011 (2) TMI 6 - Supreme Court]. The Commissioner(Appeals) has observed that the assessee has disclosed the availment of credit in ER-1 return and that the said fact was well within the knowledge of the department and therefore, it cannot be alleged that the respondent/assessees has wilfully suppressed the facts with intent to evade payment of duty. As the assessee/ respondents has reversed the credit prior to utilisation, relying upon the decision in the case of Billforge Ltd and Strategic Engineering Ltd, I find no grounds to interfere with the well reasoned order passed by Commissioner (Appeals) - demand set aside - appeal dismissed - decided against Department. Issues:Department's challenge to order setting aside demand interest and penalty on irregularly availed Cenvat credit for transportation services used in manufacturing exempted goods.Analysis:The appeal was filed by the department challenging the order passed by the Commissioner(Appeals) who set aside the demand for interest and penalty. The appellants, manufacturers of writing and printing paper, availed Cenvat credit for service tax paid on inward transportation of inputs and capital goods used in manufacturing exempted goods. Upon investigation, the appellants reversed the irregularly availed credit. A show cause notice was issued proposing to recover the irregularly availed credit. The adjudicating authority confirmed the demand with interest and penalty. The Commissioner(Appeals) set aside the demand for interest and penalty, leading to the department's appeal.The department argued that the appellants availed ineligible credit intending to evade duty payment. The department contended that the appellants aimed to retain the credit for future use when liable to pay duty exceeding the exemption limit. Citing the judgment in the case of Ind Swift Laboratories, the department asserted the liability to pay interest for irregularly availed credit. The respondent requested to decide the appeal in their absence.The Member (Judicial) heard the arguments and reviewed the records. The issue revolved around whether the assessee is liable to pay interest when irregularly availed credit is reversed before utilization. Referring to precedents like CCE, ST LTU Bangalore Vs. Billforge Pvt. Ltd., the Member noted that the High Courts of Karnataka and Madras, in line with the Indswift Labs case, have addressed similar issues. The Commissioner(Appeals) found that the assessee disclosed the credit availed in their return, indicating no willful suppression of facts to evade duty. As the credit was reversed before utilization, following the decisions in Billforge Ltd and Strategic Engineering Ltd, the Member found no grounds to interfere with the Commissioner(Appeals)'s well-reasoned order.Consequently, the appeal filed by the department was dismissed, affirming the Commissioner(Appeals)'s decision.