2011 (3) TMI 676 - AT - Service Tax

Waiver of pre-deposit - Taking excess credit on capital goods as well as on the input service credit - appellants have reversed the excess CENVAT credit taken by them but they have not paid the interest - In the show-cause notice allegation has been made that the act of the appellants are of omission and commission - appellants directed to make a payment of interest as per the impugned order and penalty of Rs.5000/- under Rule 15(1) of CENVAT Credit Rules, 2004 for contravention of the provisions of law within thirty days of the receipt of the order - Decided against the assessee.

Summary

Issues: Delay in filing appeal, Admissibility of CENVAT credit, Liability for interest and penalty

Delay in filing appeal:
The appellants, a public sector undertaking, filed an appeal with a stay application and an application for condonation of delay due to the requirement of clearance from the Committee of Disputes. The Tribunal, satisfied with the reason for delay, condoned the delay and allowed the application for condonation.

Admissibility of CENVAT credit:
The case involved the appellants allegedly availing inadmissible CENVAT credit on capital goods by claiming 100% credit instead of the permissible 50%. The appellants were providing both taxable and non-taxable services and had availed CENVAT credit on inputs used for both types of services without maintaining separate inventory. The authorities demanded recovery of the excess credit with interest and penalty under the CENVAT Credit Rules. The appellants paid the entire amount upon detection of the excess credit.

Liability for interest and penalty:
The appellants contended that the excess credit was a bona fide mistake and requested no penalty imposition, emphasizing the absence of personal interest in the error due to being a public sector undertaking. The department argued for penalty citing equal treatment principles for all assesses and the possibility of officials seeking rewards. The Tribunal noted that while the appellants rectified the excess credit upon detection, they failed to pay the interest. Despite the absence of malafides, the appellants contravened the law by taking excess credit. Consequently, the Tribunal directed the appellants to pay interest and imposed a penalty of Rs. 5000 under Rule 15(1) of the CENVAT Credit Rules for the contravention.

This comprehensive analysis covers the issues of delay in filing the appeal, admissibility of CENVAT credit, and the liability for interest and penalty as addressed in the judgment by the Appellate Tribunal CESTAT, Mumbai.