TaxTMI 
TaxTMI 
2016 (2) TMI 183
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.... "Whether Customs Excise & Service Tax Appellate Tribunal committed an error in fact and in law in reversing the order of CIT(Appeals) confirming the demand for wrongfully availed Cenvat credit of Rs. 1,07,07,142/- on the ground that the issue is revenue neutral?" 2.1 By the same order dated 01.05.2013, another question regarding penalty under Section 11AC of the Central Excise Act proposed by the Revenue was dismissed. We are, however, informed that the Revenue carried this issue in appeal before the Supreme Court and by order dated 03.08.2015, also admitted the additional question of penalty proposed by the Revenue. We, therefore, frame second question for consideration as under:- Whether the CESTAT was right in setting ....
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.... Category of Persons), Rules 2005 ((hereinafter to be referred as "the Rules of 2005") and that the tax credit from one unit was utilized for discharging tax liability of another unit instead of pro rata distribution amongst different units. Despite resistance from the assessee, the adjudicating authority by the Order in Original dated 15.12.2008 confirmed the duty demands with interest and penalties, making following observations:- "16. As can be seen from the discussions above, the noticee has violated all the rules pertaining to the availment and utilization of service tax credit and the notifications made there under. By any stretch of imagination, it cannot be accepted that violation of rules can be termed as procedural / tech....
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....order to impose penalty, it was observed as under:- "20. All the above said acts of omissions and commissions, on the part of the said noticee have rendered them liable to penalty as provided under Section 11AC of the CEA, 1944 Sub-rule (3) of Rule 15 of CCR, 2004 in as much as they have wrongly taken inadmissible Cenvat Credit of Service Tax and utilized the said credit for payment of Central Excise Duty, by reason or willful mis-statement, suppression of facts, or in contravention of the provisions of Central Excise Act, 1944 and Rules framed there under and thereby evaded payment of Central Excise duty. However, since I am imposing penalty under Section 11AC of Central Excise Act, 1944, which is the maximum, I refrain from impos....
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....o utilize full credit. It would show that the exercise is totally Revenue neutral and no loss has been caused to the Revenue (infact Revenue has gained). In the absence of any legal requirement to avail credit based on the services received during the relevant time and in the light of the decision cited by the learned counsel, the procedural irregularity has to be ignored and the demand confirmed has to be set-aside on this ground. In the result, demand for cenvat credit of Rs. 1,07,07,132/- with interest and penalty equal to the same imposed under Section 11Ac of the Central Excise Act, 1944 are setaside." 4. It is undisputed that the Rules of 2004 provide for a scheme for distribution of credit by input service distributor. Term "input....
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.... its units, which are operational in the current year, during the said relevant period." 6. The first objection of the Department therefore that the credit from one unit was utilized for the purpose of duty liability of other unit without pro rata distribution by the input service distributor therefore would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004. In fact, the Tribunal has seen entire situation as a Revenue neutral, since as pointed out by the assessee, it had availed only 20% of the credit for payment of service tax and the balance was paid in cash. 7. The second objection of the Revenue as noted was with respect of non-registration of the unit as input service distribut....
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....see. In fact, perusal of the show cause notice would show that the entire basis of the Revenue was wrongfully availment of the credit. Mere wrongfully availment without element of mens rea and that too for the purpose of evading payment of duty would not be sufficient to impose penalty. The adjudicating authority, without any basis or evidence, merely mechanically recorded that the assessee had, by reason of willful misstatement, suppression of fact or in contravention of the provisions of the Rules, evaded payment of central excise duty. He was not even sure whether this was a case of willful misstatement or suppression of fact or contravention of provisions of the Rules. 9. Question No.2, therefore, is also answered against the Revenue....