CESTAT Deletes Penalty On Availment of Credit Of Input Services Used In Co-Generation Plant For Generation Of Electricity Sold Outside

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has deleted the penalty imposed with regard to credit availed in respect of input services used in the co-generation plant for the generation of electricity sold outside.

The bench of Sulekha Beevi C.S. (Judicial Member) has upheld a penalty imposed with regard to an input service tax credit on the services used in the manufacture of ethyl alcohol.

The appellant/assessee is engaged in the manufacture of sugar, molasses, and industrial alcohol and is registered with the Department for the manufacture of the final products. They were availing the facility of cenvat credit for service tax paid on various inputs and services.

During the conduct of the audit in August 2008, it was noticed that the appellant had availed wrong credit on input services used in the co-generation plant for the generation of electricity which was being wheeled out to T.N.E.B. They also availed credit on input services used for the manufacture of ethyl alcohol.

On being pointed out by the audit officer, the appellant paid the amount by reversing the credit on 16.08.2008. Thereafter, a show cause notice dated 17.07.2012 was issued, proposing to recover the wrongly availed cenvat credit along with interest and also to impose a penalty under Section 11AC of the Central Excise Act, 1944.

After due process of law, the original authorities confirmed the demand along with interest and appropriated the amount that had already been paid by the appellant. An equal penalty under Section 11AC of the Central Excise Act, 1944 was imposed. The appellant challenged the penalty before the CIT(A). However, CIT(A) upheld the penalty.

The appellant contended that it paid up the entire duty amount in order to make peace with the department and to avoid unnecessary litigation. The duty was immediately paid on being pointed out by the department in 2008 itself, and the interest was paid after receiving the show cause notice. However, the show cause notice has been issued, invoking the extended period after a period of 4 years from the audit conducted by the Department. There was much delay in issuing the SCN and there were no grounds for invoking the extended period.

The department contended that the department had collected details with regard to the wrongly availed credit. In the returns, the appellant correctly reflected the credit taken on input services. The show cause notice was issued after a delay of 4 years, invoking unsustainable grounds, alleging that the appellant had suppressed facts with the intention of evading payment of duty.

CESTAT said that credit is eligible only when electricity is used for the manufacture of final products. The appellant cannot be burdened with the guilt of suppression of facts with the intent to evade payment of duty.

Case Title: M/s.Sakthi Sugars Ltd. Versus The Commissioner of GST & Central Excise

Citation: Excise Appeal No.42306 of 2013

Date: 19.10.2022

Counsel For Petitioner: Advocate M.N. Bharathi

Counsel For Respondent: Assistant Commissioner (AR) S. Balakumar

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