No Penalty for a manufacturer taking irregular credit on input services
A Departmental Officer raises this question.
See Rule 15 of CENVAT Credit Rules,
15. Confiscation and penalty . - (1) If any person, takes CENVAT credit in respect of input or capital goods, wrongly or in contravention of any of the provisions of these rules in respect of any input or capital goods, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed, or two thousand rupees, whichever is greater.
(2) In a case, where the CENVAT credit in respect of input or capital goods has been taken or utilized wrongly on account of fraud, willful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Excise Act or the rules made there under with intention to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of section 11AC of the Excise Act.
(3) If any person, takes CENVAT credit in respect of input services, wrongly or in contravention of any of the provisions of these rules in respect of any input service, then, such person, shall be liable to a penalty which may extend to an amount not exceeding two thousand rupees.
(4) In a case, where the CENVAT credit in respect of input services has been taken or utilized wrongly by reason of fraud, collusion, willful mis-statement, suppression of facts, or contravention of any of the provisions of the Finance Act or of the rules made there under with intention 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 section 78 of the Finance Act.
(5) Any order under sub-rule (1), sub-rule (2), sub-rule (3) or sub-rule (4) shall be issued by the Central Excise Officer following the principles of natural justice.
The doubt is :
What is the penalty for a manufacturer (who does not provide any output service) who irregularly availed credit on input services by fraud, suppression of facts?
From the above rules- the maximum penalty that can be imposed is Rs. 2000 because (4) above is not applicable
If we look at provisions of Rule 15 - (1) (2) relates to irregular availment of credit on inputs & capital goods (3)(4) relates to input services. However, the wordings of (4) are such that it is applicable to output service provider only. Obviously it is not correct. I think the wordings need to be changed to cover even manufacturer also.