2011 (3) TMI 627 - AT - Service Tax

Reversal of Cenvat Credit - Taxable and Exempted services provided by SBI - Rule 6(3)(c) of the Cenvat Credit Rules, 2004 - The provisions of the Rule restricting utilization of credit to the extent of 20% of the tax payable is a very clear cut provision and the concerned branch of the SBI was required to follow the same more so when they are claiming to be service tax collectors - The pleas that the SBI has issued an internal circular, (a copy of which is not made available), that the SBI is a Govt. Bank, that it is collecting service tax for the department etc., are extraneous to determine limitation under Section 73 of the Finance Act, 1994 - Appeal is allowed

Summary

Issues:
Violation of Cenvat Credit Rules - Utilization of credit exceeding 20% of tax amount without maintaining separate accounts.
Invoking longer period of limitation under Section 73 of the Finance Act, 1994.

Analysis:
The case involved the State Bank of India's (SBI) Leather & International Branch in Chennai, providing both taxable and exempted services, leading to a dispute over the utilization of cenvat credit. The appellant, representing the department, argued that the SBI contravened Service Tax Law with the intent to evade tax, justifying the invocation of a longer period of limitation. The respondent, represented by a Chartered Accountant, contended that the SBI had no intention to evade tax and had followed an internal circular from the Head Office regarding cenvat credit utilization. The respondent cited a Supreme Court case emphasizing deliberate actions for invoking longer limitation periods.

The judge, after hearing both sides, referred to Section 73 of the Finance Act, 1994, which outlines conditions for invoking a longer limitation period for tax evasion cases. The judge noted that the SBI failed to inform the jurisdictional officer about providing both taxable and exempted services or exceeding the 20% credit limit, as required by the rules. The judge highlighted the importance of following clear provisions, especially for a service tax collector like the SBI. The judge found elements of misstatement, suppression, and contravention with intent to evade tax in the SBI's actions, justifying the longer limitation period. The judge dismissed extraneous arguments about the SBI being a government bank or a tax collector, emphasizing the need for prompt tax payment once discrepancies were identified.

Ultimately, the judge upheld the department's appeal, setting aside the previous order and remanding the case to the lower appellate authority for a fresh decision on the merits. The judge concluded that the longer limitation period was applicable due to the SBI's actions, highlighting the importance of compliance and timely tax payments to maintain integrity in tax matters.