2010 (11) TMI 189 - AT - Service Tax

Penalty - GTA service - According to the department since the GTA service is the input service and not the output service of the appellant and since the payment of service tax on GTA service through Cenvat credit is wrong and that this service tax should have been paid through PLA - Contrary judgments on this issue and this matter has been referred to the Larger Bench shows that there was no clarity on this issue - In respect of inward freight while upholding the service tax demand has set aside the penalty of equal amount under Section 78 - There is no justification for upholding the penalty in respect of the outward freight - There was no mala fide in payment of service tax through Cenvat credit and there is no justification for imposition of penalty under Section 76 and 77 - The impugned order so far as it upheld the penalty on the appellant under Sections 76 77 and 78 of the Finance Act 1994 is set aside.

Summary

Issues:
1. Correct payment of service tax through Cenvat credit.
2. Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Correct payment of service tax through Cenvat credit
The appellant, a manufacturer of various pipes, availed Cenvat credit for service tax paid on inward transportation. The department alleged irregularities in payment of service tax on GTA service through Cenvat credit, contending that Cenvat credit should only be used for duty on finished goods or output services. The Joint Commissioner confirmed the service tax demands and penalties, which were partially set aside by the Commissioner (Appeals). The appellant challenged the penalties under Sections 76, 77, and 78 in the present appeal. The appellant argued that there was no clarity on the issue as evidenced by conflicting judgments, and therefore, no mala fide intent should be attributed to them. The Tribunal noted the conflicting judgments and the referral of a similar matter to a Larger Bench, indicating a lack of clarity. Consequently, the penalty on the appellant under Sections 76, 77, and 78 was set aside.

Issue 2: Imposition of penalty under Sections 76, 77, and 78
The Tribunal found that the appellant had paid service tax on GTA service using Cenvat credit, which was disputed by the department. The Commissioner (Appeals) upheld the penalties imposed by the Joint Commissioner, leading to the appellant's challenge in the present appeal. The Tribunal noted the conflicting judgments on whether service tax on GTA service could be paid through Cenvat credit. Given the lack of clarity and the contradictory decisions, the Tribunal concluded that there was no justification for upholding the penalties under Sections 76, 77, and 78. Therefore, the penalties were set aside, and the appeal was disposed of accordingly.

In conclusion, the Tribunal set aside the penalties imposed on the appellant under Sections 76, 77, and 78 of the Finance Act, 1994, considering the lack of clarity and conflicting judgments regarding the correct payment of service tax through Cenvat credit.