2013 (1) TMI 493 - AT - Service Tax

Cenvat credit on ineligible input services - demand for interest and penalty equal to the amount demanded - Held that - In this case the appellant did not contest the view taken by the Revenue that credit was inadmissible and therefore the amount already reversed by them cannot be refunded when the matter has attained finality. At the same time credit itself does not become inadmissible just because the appellant has reversed the credit. Therefore penalty is set-aside. Assessee even though presented very detailed argument as to why the interest is not payable when the credit itself was not utilized, it was proposed that instead of going into discussion of several cases and decisions to consider the issue, since the amount is very small, the appellant may not contest the issue. The ld. Advocate agreed. Thus the demand for interest is upheld.

Summary

Issues:
Recovery of wrongly availed cenvat credit, imposition of interest, imposition of penalty.

Analysis:
The case involved the recovery of cenvat credit amounting to Rs.93,195/- taken by the assessee on ineligible input services during a specific period. The appellant reversed the credit upon detection but did not pay any interest. The Adjudicating Authority confirmed the denial of wrongly availed credit and appropriated the amount paid by the assessee. However, the proposal for demanding interest and imposing a penalty was initially dropped by the Original Adjudicating Authority.

Subsequently, the department appealed before the Commissioner (A) who upheld the demand for interest and imposed a penalty equal to the amount demanded under relevant sections of the Finance Act, 1994, the Central Excise Act, 1994, and the Cenvat Credit Rule, 2004.

The appellant argued that the credit taken was for the maintenance of a windmill and cited precedents where such credits were deemed admissible. The judge concurred with the appellant's counsel, noting that since the appellant did not contest the inadmissibility of the credit and had already reversed it, the penalty was deemed unwarranted. The judge set aside the penalty, emphasizing that the reversal of credit did not automatically render it inadmissible.

Regarding the interest payment, although the appellant's representative presented detailed arguments against its payment due to non-utilization of the credit, it was agreed upon that, given the small amount involved, the appellant would not contest the issue. Consequently, the demand for interest was upheld based on the consent provided by the appellant's advocate to make the payment.

In conclusion, the judgment upheld the demand for interest based on consent while setting aside the penalty imposed, considering the circumstances and arguments presented during the proceedings.