2012 (7) TMI 1034 - AT - Service Tax

Summary

Issues involved: Interpretation of Cenvat credit rules for availing GTA service, imposition of penalty under Section 76 of Finance Act, 1994.

Interpretation of Cenvat credit rules for availing GTA service:
The appellant believed that Cenvat credit could be used for availing GTA service, arguing that tax liability was discharged using legitimately earned credit. However, the Department contended that Cenvat credit was not available for tax liability arising from GTA service after 18.4.2006. The appellate record revealed that the dispute pertained to the period from October 2007 to December 2007. The Appellate Authority examined the definition of output service under Rule 3(4)(e) of Cenvat Credit Rules, 2002, concluding that credit could only be set off against tax liability from providing output service. As the present case did not meet this criteria, the utilization of Cenvat credit amounting to Rs. 4,04,179 was deemed recoverable and ordered accordingly.

Imposition of penalty under Section 76 of Finance Act, 1994:
A penalty of Rs. 4,04,179 was imposed under Section 76 of the Finance Act, 1994. Since the tax element was recoverable, the penalty also became payable. The appellant's failure to discharge tax liability was attributed to a misinterpretation of the law. Therefore, the penalty aspect was remanded to the Adjudicating Authority for reconsideration of whether the conditions of Section 76 of the Finance Act, 1994 necessitated the imposition of a penalty. The appellant was granted an opportunity to provide an explanation as penalty proceedings are quasi-criminal in nature and require a fair hearing. The adjudication confirmed the tax liability, with only the penalty aspect being remanded for further consideration. It was emphasized that interest would be applicable once the tax became payable.