2018 (3) TMI 450 - AT - Central Excise

Unjust Penalty & Credit Denial Reversed: No Fraudulent Intent Found

The Tribunal held that the penalty imposed under Section 11AC of the Central Excise Act was unjustified as there was no fraudulent intent in the ... Penalty u/s 11AC - Short payment of duty - change in classification of goods - payment of differential duty with interest on being pointed out - Held that: - the appellant had disclosed the payment of duty of 10.30% attributable to the product of Chapter 73259910. Thus, malafide cannot be attributed to the appellant, justifying the invocation of the provisions of Section 11 AC of the Act for imposition of equal amount of penalty - penalty cannot be sustained. CENVAT credit - service tax paid on painting of the factory building & machinery - denial on the ground the construction of building or civil structure is falling under the Exclusion Clause contained in the definition of “input service” under Rule 2 (l) of the Rules - Held that: - the services were provided in relation to the painting of the factory building and plant & machinery, which are appropriately classifiable under category of “renovation or repair of the factory” contained in the Inclusive part of the definition of the “input service” - such service falls under the purview of the “input service” for the purpose of availment of cenvat credit - denial of credit and imposition of penalty not sustainable. Appeal allowed - decided in favor of appellant. Issues:1. Change in classification of goods and imposition of penalty under Section 11AC of the Central Excise Act, 1944.2. Denial of Cenvat credit on service tax for painting of factory building and machinery.Analysis:1. The appellant changed the classification of Camshaft, leading to a short payment of duty, which was rectified by depositing the differential amount before the show cause notice. The Adjudicating Authority imposed a penalty under Section 11AC of the Act. However, the appellant had disclosed the payment of duty in the ER-Return, showing no malafide intent. The Tribunal held that penalty under Section 11AC is justified only in cases of fraud or willful misstatement to evade duty, which was not present here. Therefore, the penalty imposed was deemed unsustainable, and the appeal was allowed.2. The denial of Cenvat credit on service tax for painting the factory building and machinery was based on the exclusion clause in the definition of 'input service.' The Tribunal examined the invoices and found that the services were related to the renovation or repair of the factory, falling under the inclusive part of the definition of 'input service.' Consequently, the Tribunal concluded that the denial of Cenvat credit and imposition of penalty were not sustainable. Therefore, the impugned order was set aside, and the appellant's appeal was allowed.