2010 (7) TMI 314 - AT - Service Tax

Penalty - Proper records were not maintained by the assessee to record input services separately for the exempted and taxable services - Cenvat credit was utilized - assessee agreed to utilise Cenvat credit to a limited extent of 20% as prescribed by Rules - Excess credit taken was paid back to revenue alongwith interest - revenue proceeded with levy of penalty against the assessee - assessee prays for waiver - Held that - conduct of the assessee is appreciable from the adjudication finding itself - assessee does fee not deserve to be deterrently penalized - penalty is waived and the appellate order set aside

Summary

Issues: Proper maintenance of records for input services, utilization of Cenvat credit, levy of penalty, waiver under Section 80 of the Finance Act 1994, applicability of penalty under Section 76 of Finance Act 1994.

The case involved a situation where the Revenue observed that the assessee failed to maintain proper records to distinguish input services for exempted and taxable services while utilizing Cenvat credit during a specific period. Upon being notified by the Revenue, the assessee acknowledged the issue and returned the excess credit taken along with interest. Subsequently, when the Revenue sought to impose a penalty, the assessee requested a waiver citing no contumacious conduct. The representative of the assessee argued that there was no deliberate wrongdoing on their part and highlighted their immunity from taxation as a 100% Export-Oriented Unit (EOU), seeking leniency under Section 80 of the Finance Act 1994.

The Departmental Representative (DR) supported the lower authority's decision and endorsed the Commissioner (Appeals)'s findings, asserting that any shortfall in Service Tax payment warrants a penalty under Section 76 of the Finance Act 1994. After hearing both sides and examining the records, the Tribunal noted the commendable conduct of the assessee as evident from the adjudication findings. The Tribunal recognized the assessee's willingness to rectify the situation promptly upon being informed, emphasizing their compliance with the law by paying interest on the amount owed. Given the absence of any malicious intent on the part of the assessee and their overall law-abiding behavior, the Tribunal concluded that penalizing the assessee for the amount in question was unwarranted. Consequently, the penalty was waived, and the appellate order confirming the penalty was set aside.

The judgment underscores the importance of maintaining accurate records for input services, the consequences of utilizing Cenvat credit without proper documentation, and the considerations for granting waivers under relevant provisions of the Finance Act 1994. It also clarifies the circumstances under which penalties may be imposed under Section 76 of the Finance Act 1994 and the Tribunal's discretion in assessing the conduct of the parties involved to determine the appropriateness of penalties in tax matters.