Imposition of Penalty under CENVAT Credit Rule will not sustain in the absence of Suppression of Fact: CESTAT [Read Order]

In a significant ruling, the Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that imposition of penalty under the CENVAT Credit rule will not sustainable in the absence of suppression of fact.

The appellants engaged in the manufacture of Sponge Iron, Ingot, Billet, Silico Manganese etc for which the appellant availed the Cenvat credit of duty paid on inputs, capital goods and service tax paid on input services in terms of Cenvat Credit Rules, 2004. The department noticed that the appellants simultaneously engaged in the generation of electricity which was captively used but some part thereof was also sold by them.

The department observed that during the period from April 14 to March 15 the appellants have availed the Cenvat credit of duty paid on input and input services as that of GTA Coal, cargo handling service on Coal, Security Service, Repair & Maintenance service and Manpower Recruitment Services and held the appellants to pay an amount equal to Cenvat credit in terms of Rule 6(1), 6(2), 6(3A), 6(3D) of CCR, 2004. 

The appellants contended that electricity produced by the appellants falls under chapter heading 27160000 of the first schedule to the Central Excise Tariff Act, 1985 but no rate of duty has been specified against electricity in the Tariff Act. The appellants have suo moto reversed the Cenvat credit taken on the import and input services proportionately used for the production of electricity.

The Tribunal observed that Show Cause Notice on this issue was served many years back and is repeatedly being served for the subsequent periods, suppression of facts cannot be alleged and the extended period was wrongly being invoked by the department.  Further, observed that Rule 6 of CCR, 2004 gives three separate options to the assessee as mentioned under sub-rule (1), (2) and (3) thereof and to exercise any one of these options is the prerogative of the assessee for which the department cannot compel to opt for a particular option. 

Dr Rachna Gupta, member (judicial) held that invocation of an extended period of limitation has also been wrongly confirmed by the CIT(A) and the impugned order was set aside. Ms Surabhi Sinha appeared for the appellant and Mr Mahesh Bhardwaj appeared for the Respondent.

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