Custom, Excise & Service Tax Tribunal
Vimko Auto Industries Ltd. (Unit-I) vs Cce & St, Ludhiana on 7 April, 2017
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017 COURT NO. II APPEAL NO. E/4/2015 [Arising out of Order-in-Appeal No. JAL-EXCUS-000-APP-173-15-16 dated 23.07.2015 passed by the Commissioner of Service Tax (Appeals), Chandigarh-II] Date of hearing: 09.12.2016 Date of decision: 07.04.2017 For approval and signature: Honble Mr. Devender Singh, Member (Technical) =======================================================
Vimko Auto Industries Ltd. (Unit-I) :
Appellant(s) VS CCE & ST, Ludhiana :
Respondent(s) ===================================================== Appearance:
Sh. Ravi Chopra, Advocate for the Appellant(s) Sh. V.K. Trehan, AR for the Respondent(s) CORAM:
Honble Mr. Devender Singh, Member (Technical) FINAL ORDER NO. 60586/2017 Per : Devender Singh
1. Brief facts of the case are that the appellants were engaged in the manufacture of different types of Rubber Belt and Hose Pipes falling under Chapter 40. During the course of audit of the appellant in 2010, an objection was raised regarding the inadmissibility of cenvat credit of service tax on invoices not being in their name. After investigation, following discrepancies were noticed:-
No invoices available in respect of certain credits availed; Only photocopies of some of the invoices were available; Some invoices were not in the name of the appellant; and Credit of services, not covered under input serviceswas availed by them. The period involved is from April 2009 to October 2010.
1.2 A show cause notice was issued to them demanding duty of Rs. 24,71,661/- along with interest and proposing penalty under Section 11AC. The show cause notice also proposed seizure of 7691 pieces of unaccounted V belts/fan belts valued at Rs. 2,19,257/-. The matter was adjudicated and the adjudicating authority disallowed the cenvat credit and imposed the penalty of Rs. 24,71,661/-. The seized goods were compensated and the redemption fine and penalty were imposed in respect of seized goods also. The party went in appeal.
1.3 The Commissioner (Appeals) in his order directed the appellants to approach jurisdictional AC/DC with all the input service invoices and other co-related documents to show the admissibility of credit as per his detailed direction in para 5.3, 5.4 and 5.5 of the Order-in-Appeal. The Commissioner (Appeals) also upheld the extended period and penalty in respect of the amount which would be equal to the amount of inadmissible cenvat credit quantified by the jurisdictional AC/DC for the period w.e.f. 27.02.2010. As per the direction of Commissioner (Appeals), the Assistant Commissioner carried out the verification of invoices and gave the following report:
2. In this regard as per verification report of the by the Jurisdictional Range Officer in terms of para 5.3, 5.4 and 5.5 of the Order-in-Appeal, the credit pertaining to only Unit-I is allowable. Thus out of total credit of invoices issued in the name of Jalandhar office an amount of Rs. 15,35,056/- (11,25,106 + 4,09,950) is found to be allowable and an amount of Rs. 4,12,366 is found to be not allowable. Further out of total credit of Rs. 5,24,239/- taken on the invoices issued in the name of Delhi office, an amount of Rs. 3,80,942/- is found allowable and an amount of Rs. 1,43,297/- is found to be not allowable in terms of para 5.4 of the subject O-in-A. Thus an amount of Rs. 5,55,663/- is not allowable. The details of amount allowable and not allowable are given in the annexure.
3. Further in terms of para 9 of the O-in-A, wherein it has been held that the penalty is not imposable for the period prior to 27/02/2010 and the penalty is imposable equal to the amount of input service credit found wrongly availed by the appellant for the period w.e.f. 27/02/2010 only. Out of the total credit amount of Rs. 5,55,663/- found to be not allowable, an amount of Rs. 1,96,907/- has been found pertaining to the period w.e.f. 27/02/2010 on which equal of amount of penalty i.e. Rs. 1,96,907/- is imposable in terms of para 9 of the subject O-in-A. 1.4 The appellant, aggrieved by the order of the Commissioner (Appeals) and the verification report pursuant to his order, has filed this appeal before this Tribunal.
2. Ld. Advocate for the appellants submits that out of the denial of credit of Rs. 5,24,239/-, they are not disputing the denial of Rs. 4,05,759/-. The denial of Rs. 30,060/- on the ground that original invoices are misplaced during the shifting of factory premises has not been favourably considered by the lower authorities and there was no allegation that credit on the same was taken by Unit-I as well as Unit-II. He also disputed the credit of Rs. 1,19,844/- claiming that the appellants were maintaining their Delhi office as a branch office in relation to their business and at the relevant time activities relating to business were covered under the definition of input-services. He argued on the penalty and submitted that credit was availed in routine and no melafide was involved. Since all the transactions were duly recorded in the specified record, penalty in excess of 50% was not imposable. He claimed that the fact of availment of invoices issued in the name of the Delhi office was also brought to the notice of the department vide letter dated 16.07.2010. On the seized goods, he stated that these goods were manufactured for export and were not entered in the RG-1 as they were not fit for the export. Hence they had not cleared the goods and the same were still lying in the factory. The appellants were not interested in the goods and are only seeking for the waiver of penalty.
3. Ld. AR for the Revenue opposes the contention of the appellants and reiterates the findings in the order of Commissioner (Appeals).
4. Heard the parties and perused the records.
5.1 I find that the appellants are contesting the demand of Rs. 30,060/- on the ground that original invoices have been misplaced and of Rs. 1,19,844/- on the ground that the activities in Delhi office related to business. In this regard, the Commissioner (Appeals)s direction to disallow the credit for which only photo copies are available and there are no original invoices cannot be faulted. If photo copies as an alternative are accepted for allowing cenvat credit, it enhances the chances of fraud and mis-use of facility.
5.2 As for the credit of Rs. 1,19,844/-, the Commissioner (Appeals) has only disallowed the credit in respect of invoices issued in the name of Delhi office which pertain to services exclusively utilized by Unit-II. During the material period, the Delhi office was not registered as input service distributer and it has rightly been observed by Commissioner (Appeals) that the proper procedure for availment of the credit of such invoices was for the Delhi office to have got themselves registered as input service distributer. Hence, the order of Commissioner (Appeals) is in accordance with the rules as in force at the material time.
5.3 As for the penalty in respect of seized goods, the authorized signatory, in his statement recorded on the spot, admitted that the same were not entered in their records. The appellants did not produce any evidence that the same not being manufactured product or were recorded in their records as scrap. Besides the appellants did not approach the concerned authority for remission of duty. The Commissioner (Appeals) has rightly upheld imposition of penalty only after 27.02.2010 when the law was amended to impose penalty for wrong availment of credit of Service Tax by suppression of facts with an intent to evade Central Excise duty. Hence there is no infirmity in the order of Commissioner (Appeals).
5.4 As for the plea that penalty in excess of 50% was not imposable, I find that the appellants never disclosed to the department that they are taking cenvat credit of service tax on the invoices issued in the name of the other party and never supplied the original records till the time show cause notice was issued. The appellants were repeatedly requested by the Range Office through numerous letters in 2011 to deposit the wrongly availed cenvat credit of service tax and to supply the original invoices for verification. The same was not done in respect of contested cenvat credit amount and this way there was clearly suppression with an intent to service tax. Hence penalty as well as extended period have been rightly applied. In a similar situation where inadmissible credit was detected in Audit scrutiny CCE, Ghaziabad Vs. Rathi Steel & Power Ltd. 2015 (321) ELT 200(All.), the Honble High Court of Allahabad held as under:-
32. We further find that under Rules, 2004, a burden is cast upon the manufacturer to ensure that Cenvat credit is correctly claimed by them and proper records are maintained in that regard.
33. The assessee, in response to the show cause notice had stated that there is no provision in Central Excise Law to disclose the details of the credit or to submit the duty paying documents, which in our opinion is false and an attempt to deliberately contravene the provisions of the Act, 1944 and the rules made thereunder with an intent to evade the duty.
34. In our opinion, the facts of the present case clearly suggest willful suppression of material facts by the assessee as well as contravention of the provisions of the Act and rules framed thereunder with an intent to evade the demand of duty as would be covered by Clauses IV and V of Section 11A(1) of the Act, 1944. Therefore, the invocation of the extended period of limitation in the facts of the present case is fully justified. Applying the ratio of the above High Court judgment, I find that the extended period has rightly been invoked and penalty has rightly been imposed in this case.
6. In view of the above, I find no infirmity in the order of Commissioner (Appeals) and the same is upheld.
7. In the result, the appeal is dismissed.
(Order pronounced in the court on 07.04.2017) Devender Singh Member (Technical) RAS 6 E/4/2015 - CHD