2013 (5) TMI 562 - AT - Service Tax

Cenvat credit denied - Demand of interest/penalty - Reversal of entire credit by appellant before issuance of SCN - Held that - Perusing the records, it is seen that the appellant availed CENVAT credit and the amount was paid by the service provider. Thus, there is no suppression of fact with intent to evade payment of tax also that the appellant paid the tax before issue of SCN. There is sufficient cause for failure to reverse the credit. Thus, Section 78 cannot be invoked. The demand of CENVAT credit which has already been paid along with interest is upheld.

Summary

Issues:
1. Denial of CENVAT credit on maintenance of garden and printing of stationeries for telephone communication service.
2. Imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
1. The appellant, engaged in telephone communication services, had CENVAT credit denied on maintenance of garden and printing of stationeries. The appellant reversed the credit before a show-cause notice was issued. The adjudicating authority denied the credit due to the services falling under the exempted category. The Commissioner (Appeals) upheld this decision. The appellant argued that they reversed the credit based on audit queries before the notice was issued. The appellant also contended that they paid the tax before the notice, thus the penalty under Section 78 should not apply. The AR argued for the penalty, citing suppression of fact. However, it was found that the appellant had paid the tax before the notice, and there was no intent to evade payment. The Tribunal held that there was a sufficient cause for the failure to reverse the credit and set aside the penalty under Section 78. The demand for CENVAT credit already paid along with interest was upheld, and the appeal was disposed of accordingly.

2. The key issue in this part of the judgment was the imposition of penalty under Section 78 of the Finance Act, 1994. The appellant argued against the penalty, stating that they had paid the tax before the show-cause notice was issued. The AR contended that there was suppression of fact, justifying the penalty. However, upon review, it was determined that there was no intent to evade payment of tax as the tax was paid before the notice. The Tribunal found that Section 78 could not be invoked in this case and subsequently set aside the penalty imposed under this section. The Tribunal upheld the demand for the CENVAT credit that had already been paid along with the interest. The judgment was pronounced in open court, resolving the matter comprehensively.