2012 (10) TMI 447 - AT - Service Tax

Penalty separate accounts alleged that appellants availed cenvat credit in respect of even those services which were not covered by the provisions of Rule 6(5) providing for cenvat credit even when separate accounts are not maintained Held that - When the omission was pointed out, the appellants promptly reversed the cenvat credit - appellant is a public sector unit and having regard to the size of the company and the operations of the company and also the circumstances, availment of wrong credit has happened because of accounting error and is a mistake - provisions of Section 80 are invocable in this case - penalty imposed on the appellant is set aside

Summary

Issues:
1. Availment of cenvat credit on input services not covered under Rule 6(5) of Cenvat Credit Rules, 2004.
2. Liability to pay interest and imposition of penalty under Rule 15 of CCR, 2004 read with Section 11AC of Central Excise Act, 1944.
3. Appellant's contention of genuine mistake and intention to evade duty.
4. Applicability of the decision in the case of Ind Swift Laboratories Ltd. on the issue of interest.
5. Consideration of penalty waiver under Section 80 of Finance Act, 1994 for a public sector unit.

Analysis:
1. The appellant availed cenvat credit on input services not covered under Rule 6(5) of Cenvat Credit Rules, 2004, amounting to Rs. 2,16,143 during March 2008 to February 2009. Although the appellant promptly reversed the credit upon detection, interest payment was not made. Proceedings were initiated for interest recovery and penalty imposition under Rule 15 of CCR, 2004 read with Section 11AC of Central Excise Act, 1944. The issue primarily concerned the imposition of penalty.

2. The appellant's counsel acknowledged the erroneous availment of cenvat credit but argued that it was a genuine mistake without any intention to evade duty. Citing past decisions, the counsel contended that interest was not payable if the credit was not utilized, based on the interpretation of the law prevailing at that time. However, with the Supreme Court's decision in the case of Ind Swift Laboratories Ltd., the liability to pay interest was established. The appellant had maintained excess credit during the relevant period, indicating no intention to evade duty.

3. Regarding penalty imposition, considering the appellant as a public sector unit and the circumstances explained by the counsel, the Tribunal found that the wrongful credit was due to an accounting error and deemed it a mistake. Given the excess credit maintained by the appellant during the relevant period and the absence of intent to evade duty, the Tribunal invoked Section 80 of the Finance Act, 1994, to waive the penalty. Thus, the penalty imposed on the appellant was set aside based on the provisions of Section 80, and the appeal was disposed of accordingly, along with the stay petition.

This comprehensive analysis of the judgment highlights the issues surrounding the availment of cenvat credit, liability for interest payment, the appellant's contention of genuine mistake, the impact of the Ind Swift Laboratories Ltd. case on interest liability, and the Tribunal's decision on penalty waiver under Section 80 for a public sector unit.