2011 (8) TMI 1239 - AT - Service Tax

Summary

Issues involved:
The issues involved in the judgment are evasion of service tax, waiver of pre-deposit of service tax, denial of CENVAT credit on capital goods, and imposition of penalty.

Evasion of service tax:
The applicants were engaged in various services but were found to be evading payment of service tax on the services provided to their clients. Proceedings were initiated against them based on intelligence gathered by DGCEI. A show-cause notice was served on the applicants for the demand of service tax for the period from September 2003 to March 2006. The demand of service tax was confirmed along with interest and a penalty of Rs. 6,06,55,417.

Waiver of pre-deposit of service tax:
The applicants sought waiver of pre-deposit of the balance amount of service tax of Rs. 14,61,843 and waiver of the penalty imposed by the impugned order. The advocate for the applicants argued that the applicants had paid a significant portion of the service tax liability before the issuance of the show-cause notice. He also claimed that the adjudicating authority had not considered their claim of CENVAT credit on capital goods. The applicants were willing to make a pre-deposit of Rs. 50 lakhs as penalty within twelve weeks, and on compliance, the balance amount of service tax and penalties would remain stayed during the pendency of the appeal.

Denial of CENVAT credit on capital goods:
The applicants contended that the adjudicating authority had denied them CENVAT credit of Rs. 10 lakhs on capital goods. This denial was a point of contention raised by the applicants in their defense against the demand for service tax and penalty.

Imposition of penalty:
The applicants admitted their liability to pay service tax, which they had paid along with interest. However, they sought waiver of penalty during the pendency of the appeal. The tribunal found that the applicants were duty-bound to pay service tax on time and file returns accordingly. Despite the payment of a significant portion of the service tax liability and penalty, the tribunal did not find grounds for a complete waiver of penalty. The tribunal directed the applicants to make a pre-deposit of Rs. 50 lakhs as penalty within twelve weeks, and upon compliance, the balance amount of service tax and penalties would remain stayed during the appeal process.