2016 (9) TMI 1300 - AT - Service Tax

CENVAT credit - the appellant have availed double credit in respect of some invoices and simultaneously they have paid entire amount alongiwth interest - assessee claims it to be bonafide mistake - Held that - wrong availment of credit of 5 invoices are due to reason that some invoices were entered twice in the Cenvat account maintained on computer system - Moreover when the mistake was pointed out by the audit party, appellant have promptly paid the entire service tax with interest. In a case where service tax alongwith interest is paid voluntarily without any contest, immunity is available u/s 73(3) - the appellant has made out fit case for waiver of penalty u/s 73(3) of FA, 1994 - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Availment of Cenvat credit twice for 5 invoices
- Demand of service tax and penalty under Section 78
- Applicability of Section 73(3) of the Finance Act, 1994

Analysis:

Issue 1: Availment of Cenvat credit twice for 5 invoices
The appellant availed Cenvat credit for 5 invoices twice, leading to a demand for service tax and penalty imposition under Section 78. The mistake was identified during an audit in December 2011, where it was noted that the appellant had availed double credit for certain invoices. The appellant then paid the entire amount along with interest voluntarily on 10-1-2012. Subsequently, a show cause notice was issued proposing the demand of service tax and appropriation of the amount already paid. The appellant argued that the double entry was due to inadvertent and clerical errors, which was supported by the fact that they promptly paid the wrongly availed Cenvat credit upon discovery, without contest.

Issue 2: Demand of service tax and penalty under Section 78
The adjudicating authority confirmed the demand of service tax, appropriated the amount paid by the appellant, and imposed a penalty under Section 78 equal to the Cenvat credit amount. The Commissioner(Appeals) upheld this decision, leading the appellant to seek waiver of the penalty under Section 78. The appellant's counsel argued that the mistake was unintentional, and the appellant had a large organization with numerous transactions, making inadvertent errors possible. The appellant contended that the penalty under Section 78 should not have been imposed as the case fell under the provisions of Section 73(3) of the Finance Act, 1994, which provides immunity if the service tax along with interest is voluntarily paid without contest.

Issue 3: Applicability of Section 73(3) of the Finance Act, 1994
The appellant's case was analyzed in light of Section 73(3) of the Finance Act, 1994, which states that if the service tax along with interest is voluntarily paid by the assessee upon ascertainment by the department, no show cause notice should be issued, and the case stands settled immediately after payment. The Tribunal found that the appellant's case fell under the purview of Section 73(3) as the double entry was acknowledged as inadvertent, and the entire service tax along with interest was paid without contest upon discovery. Therefore, the Tribunal set aside the impugned order, allowed the appeal, and granted waiver of the penalty imposed under Section 78.

This detailed analysis highlights the inadvertent error in availing Cenvat credit, the voluntary payment made by the appellant upon discovery, and the application of Section 73(3) to provide immunity from penalty under Section 78.