Custom, Excise & Service Tax Tribunal
Cesare Bonetti India Ltd vs Valsad on 9 September, 2025
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Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO. 02
Service Tax Appeal No. 11972 of 2018
[Arising Out Of OIA-CCESA-AUDIT-SRT-VK-122-123-2017-18 Dated- 23/05/2018 passed by
the Commissioner ( Appeals ), Central Excise, Customs and Service Tax-SURAT-I)
Cesare Bonetti India Ltd .....Appellant
(formerly Known As M/s. Waaree Industries P Ltd.),
206, Platinum Mall, Opp. Via Ground,gidc,
VAPI,, GUJARAT
VERSUS
C.C.E & S.T.-Valsad .....Respondent
Third Floor, Adarashdham Building, Vapi-Daman Road, Vapi, Gujarat Gujarat-396191 APPEARANCE:
Shri. Kushal Rathi, CA for the Appellant Shri. N. G Makwana, Superintendent (AR) for the Respondent CORAM: HON'BLE MR. SOMESH ARORA, MEMBER ( JUDICIAL ) HON'BLE MR. SATENDRA VIKRAM SINGH, MEMBER ( TECHNICAL ) Final Order No. 10707/2025 DATE OF HEARING: 02.07.2025 DATE OF DECISION: 09.09.2025 SATENDRA VIKRAM SINGH M/s. Waree Industries Pvt Ltd Tal-Umbergaon, District-Valsad are registered with Service Tax department under renting of immovable property service. Subsequently, they changed their name to M/s. Cesare Bonetti India Ltd (Appellant) vide certificate of incorporation dated 22.06.2018 issued by the Registrar of companies.
1.1 On scrutiny of records, Central Excise Preventive Officers noted that the appellant had availed Cenvat Credit of Rs. 1,55,69,580/- on work
2|Page ST/11972/2018-DB contract service availed for construction of factory building, which does not fall under the definition of input service. They officers recorded the statements of the concerned person (s) including statements of group Director and issued a show cause notice dated 23.02.2017 proposing recovery of Cenvat Credit of Rs. 1,55,69,580/- along with interest and imposition of penalty on the appellant under Rule 15(3) of the Cenvat Credit Rules, 2004 (CCR,2004) read with Section 78 of the Finance Act, 1994. A separate proposal for imposition of penalty on Shri. Kirit C Doshi, Director of the appellant under Section 78A of the Finance Act 1994 and Rule 15 of the CCR, 2004 was also made.
1.2 The above show cause notice was decided by the adjudicating authority wherein, he besides confirming the entire demand of Cenvat credit along with applicable interest, also imposed equal penalty on the appellant under Rule 15 (3) of CCR, 2004 and Section 78 of the Finance Act, 1994. He also imposed penalty of Rs. 25 lakhs on Shri. Kirit C Doshi Director under Rule 26 of the Central Excise Rules, 2002. Aggrieved with this order, Appellant filed appeal before the Commissioner (Appeals) who vide impugned order dated 23.05.2018 held that as the appellant has used Cenvat Credit of Rs. 1,08,88,792/- only out of the availed credit of 1,55,69,580/-, the penalty of Rs. 1,08,88,792/- only is imposed. He also held that penalty of 25% of the defaulted amount will be sufficient for the purpose of law. Penalty on the Director was set aside. Aggrieved by this order, the appellant filed appeal before this Tribunal.
2. In their appeal the Appellant mentioned the following grounds:-
a. 100% penalty has been imposed on the appellant instead on the appellant of 50% of the service tax amount as per the provisions of 15(3) of CCR,2004 read with Section 78 of the Finance Act, 1994.
3|Page ST/11972/2018-DB (b) Penalty is not imposable if service tax along with interest is paid before
the issue of show cause notice. They rely on the following case laws.
• Commissioner of Customs, Bangalore vis Powerica Ltd.- 2012 (276) E.L.T. 302 (Kar.) • C.C.E. & S.T., LTU, Bangalore v/s. Adecco Flexione Workforce Solutions Ltd.- 2012 (26) S.T.R. 3 (Kar.) • Commissioner v/s. Tejas Agency-2014 (34) S.T.R. 803 (Guj.) • Union of India v/s. T.P.L. Industries Ltd.- 2007 (214) E.L.T. 506 (Raj.)
(c) Penalty could not be levied in absence of mens-rea Section 78 of the Finance Act, 1994 is not applicable because there is no suppression of facts, wilful misstatement, fraud, collusion or contravention of any provision of law with intention to evade payment of service tax. They relied upon the following case laws:
• Transformers & Electicals Kerala Ltd V/s CCE, Cochin-2008 (9) STR 285 (tri. Bang) • Sanghi Industries Ltd Vs. CCE, Rajkot-2008 (12) STR 495 (Tri-Ahmd.) • Metri Shoes Pvt Ltd Vs. CCE, Mumbai-I-2008 (10) STR 382 (Tri.
Mumbai) • CCE., Cust & Service Tax, BBSR-I Vs. Sanfin.- 2009 (13) STR 551 (Tri-
Kolkata) • Punjab Ex-Servicemen Corpn-2009 (13) STR 529 (Tri-Del.) • Vijay Television (P) Ltd. Vs. CCE, Cennai.- 2009 (13) STR 296 (Tri-
chennai) • commissioner of Central Excis, Nagpur vs. Ultra Tech Cement Ltd.-
2009 (16) STR 611 (Tri.-Mumbai) • commissioner of Central Excise, Indore vs. P.T. Education & Training Service Ltd.- 2009 (15) STR 453 (Tri-Del) • P.T. Education & Training Service Ltd. Vs. Commissioner of Central Excise, Jaipur.- 2009 (14) STR 34 (Tri -Del) • CCE, Jaipur-i V/s. Louis Berger Internation Inc.- 2009 (13) STR 381 (Tri.-Del) • New Delhi M/s. Malhotra Cables P Ltd Vs. CCE, Delhi-I-2016 (1) TMI 816 -CESTAT, • Uniworth Textiles Ltd. Vs. CCE, Raipur-2013 (288) ELT 161 (S.C) d. Total service tax liability including interest and penalty were paid before the issue of show cause notice dated 23.01.2017. They had written two lakh letters dated 20.05.2015 & 05.06.2015 to the department after payment of dues for closure of the proceedings under section 73 (4A) and not to issue
4|Page ST/11972/2018-DB any show cause notice. They rely on the decision of Mumbai Tribunal in the case of Commissioner of Central Excise, Pune-III Vs. Wings Travels reported in 2017 (47) STR 225 (Tri. Mumbai) e. The adjudicating authority has invoked extended period on the ground that full break up of Cenvat Credit was not given in ST-3 returns. This reasoning is not correct as there were no columns in ST-3 return to give details of Cenvat Credit availed with full break up. As such, extended period of limitation is not invokable.
f. The input service credit relates to construction of factory on their plot which was given on lease. They had also paid the service tax on the rental income.
g. Provisions of Section 73(4A) have wrongly been interpreted by the Appellate authority. They had already paid full Cenvat credit amount along with interest & penalty at the rate of 1% per month and therefore, the case should have been closed without issue of show cause notice. No findings have been given on validity of show cause notice issued in this case after payment of full credit amount, interest and penalty at the rate of 1%. h. In view of the above, they prayed to hold the Respondent's order imposing penalty at the rate of 25% of Cenvat Credit wrongly availed and utilized as illegal as they have correctly paid the penalty at the rate of 1% per months as per the provisions of Section 73 (4A). 2.1 During hearing, Learned Counsel reiterated and explained the grounds taken in their appeal. He emphasised that as recovery of Cenvat credit is under Rule 14 of CCR, 2004, the provisions of Section 11A of the Central Excise Act, 1994 and Section 73 of the Finance Act, 1994 also apply mutatis mutandis for effective such recoveries. Thus, complete provisions of section 73 of the Finance Act, 1194 are applicable in their case. As they had paid the liability before issue of the show case notice benefit of Section 73 (4A) of the
5|Page ST/11972/2018-DB Finance Act, 1994 is admissible to them and there was no need to issue show cause notice in the case. He cited the decision of this tribunal in the case of CCE & ST, SURAT Vs. M/S. OM INFRA-2018 (1) TMI 426 - CESTAT AHMEDABAD.
2.2 Learned counsel also argued that the appellant had bonafide belief for their entitlement to the said credit. Therefore, as per well settled law, extended period cannot be involved in such cases. They relied upon the following cases:
• OBEROI MALL LTD Vs. COMMISSIONER OF SERVICE TAX, MUMBAI-II- 2017 (47) S.T.R. 292 (Tri. -Mumbai).
• NAVARATNA S.G. HIGHWAY PROP. PVT. LTD. Versus COMMR. OF S.T., AHMEDABAD 2012 (28) S.T.R. 166 (Tri. - Ahmd.).
• C. M/S SHAH ALLOYS LTD Vs. COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-III 2013 (7) TMI 466 CESTAT AHMEDABAD. • COMMISSIONER OF C. EX., JAIPUR-I VERSUS PUSHP ENTERPRISES- 2010 (11) TMI 835CESTAT, NEW DELHI.
2.3. Further to that, there is no suppression of facts and wilful mis-
statement, fraud, collusion etc. Therefore, penalty under section 78 is not imposable. They relied on the following case law:-
• 2008 (12) S.T.R. 495 (Tri. Ahmd.) SANGHI INDUSTRIES LTD v/s CCE-RAJKOT.
• 2008 (10) S.T.R. 382 (Tri. Mumbai) METRO SHOES PVT. LTD. v/s CCE, MUMBAI-1.
2.4 Highlighting the provisions of Section 73 of the Finance Act, 1994, Learned Advocate argued that the department should not have issued the show cause notice once entire Cenvat Credit along with, interest and 1% penalty was paid by them and the matter should have been closed.. He relied on the following case law:
• Commissioner of Central Excise, Pune-III vs. Wings Travels [reported in 2017 (47) STR Page 225 (Tri. Mumbai). • ABB LIMITED Vs. COMMISSIONER OF SERVICE TAX, BANGALORE
- 2018 (2) TMI 933 BANGALORE.
4. Learned AR on the other hand, reiterated the finding of the lower authority. He mentions that availment of wrong credit came to the notice of
6|Page ST/11972/2018-DB the department only when search was conducted by the preventive officers on the basis of prior intelligence. Therefore, element of mens rea is clearly visible and penalty under section 78 of the Finance Act, 11994 read with Rules 15 (3) has rightly been imposed. He further argued that the provisions of section 73(A) of the Finance Act, 1194 which were omitted w.e.f.
14.05.2015 are not applicable in their case. As the appellant had availed wrong credit and utilized the same, penalty is imposable under Rules, 15 (3) of CCR, 2004 in terms of Section 78 of the Finance Act, 1994.
5. We have heard the rival submissions. As per the department, the appellant had availed inadmissible Cenvat Credit of Rs. 1,55,69,580/- on works contract service for construction of factory building. Rule 2(l) of the Cenvat Credit Rules, 2004 defines input service as under:-
" [(l) ―input service means any service, -
(i) used by a provider of [output service] for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal;
but excludes, -
[(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for -
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b)............................................"
5.1 Admittedly, the appellant was not entitled to Cenvat Credit on work contract service and therefore, the same according to us has rightly been denied by the appellate authority vide impugned order. It is also on record
7|Page ST/11972/2018-DB that the above Cenvat credit amount stands paid by the appellant along with interest. Out of wrongly availed Cenvat Credit of Rs. 1,55,69,580/-, the appellant had utilized Cenvat credit of Rs. 1,08,88,792/- till March, 2014 for payment of service tax which includes utilization of credit of Rs. 10 lakhs in June, 2012, Rs. 30 lakh in February, 2013, Rs. 14 lakh in October, 2013 and Rs. 28,88,794/- in March, 2014. There is no dispute before us about payment/reversal of inadmissible Cenvat credit and interest thereon. The issue of imposition of penalty on the Director of the appellant under Rule 26 of the Central Excise Rules, 2002 has also been decided by the Appellate authority by setting aside the penalty. The only issue which remains before us is imposition of penalty on the appellant under Rule 15 (3) of the CCR, 2004 for availment and utilization of wrong credit. 5.2 We find that the adjudicating authority has imposed penalty of Rs. 1,55,69,580/- under Rule 15 (3) of the CCR, 2004 in terms of the provisions of Section 78 of the Finance Act, 1994. In appeal against this order, the appellate authority vide impugned order has reduced this penalty from Rs. 1,55,69,580/- (which was equal to total Cenvat Credit availed) to Rs. 1,08,88,792/- on the ground that only this much credit was utilized by the appellant. He also gave option to pay 25% of this amount towards penalty under proviso to Section 78 of the Finance Act, 1994. We however find that the argument of the appellant is that since they had paid full Cenvat Credit along with interest and penalty at the rate of 1% per month in terms of Section 73 (4A) of the Finance Act, 1994, their case should have been closed and show cause notice should not have been issued. The provisions of Section 73 (4A) which was Omitted vide THE FINANCE ACT, 2015 w.e.f. 14th May 2015 is reproduced below:-
"[(4A) Notwithstanding anything contained in sub-sections (4)), where during the course of any audit, investigation or verification, it is found that any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, but the true and complete details of transactions are available in the specified records,
8|Page ST/11972/2018-DB the person chargeable to service tax or to whom erroneous refund has been made, may pay the service tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded along with interest payable thereon under section 75 and penalty equal to one per cent of such tax, for each month, for the period during which the default continues, up to a maximum of twenty-five per cent of the tax amount, before service of notice on him and inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under sub- section (1) in respect of the amount so paid and proceedings in respect of the said amount of service tax shall be deemed to have been concluded:
Provided that the Central Excise Officer may determine the amount of service tax, if any, due from such person, which in his opinion remains to be paid by such person and shall proceed to recover such amount in the manner specified in sub-section (1).
Explanation.-For the purposes of this sub-section and section 78, "specified records" means records including computerised data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of account shall be considered as the specified records.]"
5.3 Rule is 15(3) of the CCR, 2004 reproduced below:
"(3) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of the rules made there under with intent to evade payment of service tax, then, the provider of output service shall also be liable to pay [penalty in terms of the provisions of sub-section (1) of section 78] of the Finance Act."
5.4 Section 78 (1) of the Finance Act, 1994 is reproduced below:
"78. Penalty for suppressing value of taxable service. -[(1) Where any service tax has not been levied or paid or has been short- levied or short-paid or erroneously refunded, by reason of --
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made there under with intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if
9|Page ST/11972/2018-DB any, payable by him, which shall be equal to the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded:
Provided that where true and complete details of the transactions are available in the specified records, penalty shall be reduced to fifty per cent. of the service tax so not levied or paid or short-levied or short- paid or erroneously refunded:
Provided further that where such service tax and the interest payable thereon is paid within thirty days from the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under the first proviso shall be twenty-five percent of such service tax:
Provided also that the benefit of reduced penalty under the second proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso:
Provided also that...............................
(2) ....................................................
5.5 We find that Rule 15(3) of the CCR, 2004 prescribes penalty in cases where Cenvat Credit has been taken or utilized wrongly by reasons of fraud, collusion.......etc., in terms of Section 78 of the Finance Act, 1994. This Section prescribes penalty where service tax has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion.... etc. Section 73 of the Finance Act, 1994 prescribes the methodology for recovery of service tax not levied or paid or short levied or short paid or erroneously refunded from the output service provider. Sub Section 4A of Section 73 talks about specific situation where non payment or short payment of service tax has been found out during the course of any audit, investigation or verification but true and complete details of the transaction are available in specified records. The present matter involved wrong utilization of Cenvat Credit for payment of service tax and since, availment of Cenvat Credit itself was wrong, it effectively turns out to be non-payment or short payment of service tax by the appellant. Further, since the transactions were duly recorded by the appellant in the specified records such as ST-3 returns, we are of the view that the present matter is squarely covered under Section 73 10 | P a g e ST/11972/2018-DB (4A) of the Finance Act, 1994. As the Appellant had already paid the amount along with interest and penalty at the rate of 1% per month, in terms of the provisions of section 73(4A), the matter of the appellant should have been closed without issue of show cuase notice. We therefore hold that the penalty already deposited by the appellant as per provisions of Section 73(4A) is sufficient to close the matter and there was no need to invoke the provisions of Section 78(1) of the Finance Act, 1994 for levy of equal penalty. Accordingly, we allow the appeal and modify the impugned order dated 23.07.2018 to this extent.
6. The appeal is allowed as discussed above.
(Pronounced in the open court on 09.09.2025) (SOMESH ARORA) MEMBER ( JUDICIAL ) (SATENDRA VIKRAM SINGH) MEMBER ( TECHNICAL ) Prachi