2013 (8) TMI 159 - AT - Service Tax

Interest on Cenvat credit - cenvat credit availed on service tax paid on the commission - Held that - availment of cenvat credit of the service tax paid on the commission paid to the foreign national, was in line of his business and hence availment of cenvat credit on such payment of service tax seems to be correct as it is not disputed by the department - having filed the refund claim, the appellant had reversed the cenvat credit even before the refund was sanctioned to him - Decided in favour of assessee.

Summary

Issues:
Imposition of interest under Rule 14 of the Cenvat Credit Rules, 2004 and penalty under Rule 27 of the Central Excise Rules, 2002.

Analysis:
The appeal challenged the imposition of interest and penalty on the appellant for availing cenvat credit wrongly on service tax paid to foreign agents. The appellant contended that they calculated and paid the service tax on their own, later realizing it was not required. They filed a refund claim and reversed the cenvat credit before the refund was sanctioned. The Department argued that the appellant's reversal indicated wrongful credit. The Tribunal found the issue to be the interest liability for availing cenvat credit wrongly and penalty.

The Tribunal noted that the appellant paid the service tax on commission to foreign agents, availed cenvat credit uncontested by the department, and reversed it before refund sanction. The appellant's actions were deemed correct as it was related to their business, and the department did not dispute the credit. The Tribunal concluded that the appellant acted diligently by reversing the credit before refund approval, and therefore, the demand for interest was set aside.

Regarding the penalty, the Tribunal upheld the reduction of the penalty from Rs. 2000 to Rs. 1000. The penalty was imposed for violations related to cenvat credit availed on service tax paid to foreign agents, which was resolved in favor of the appellant. However, the penalty for wrong availment of cenvat credit on insufficient documents was upheld partially.

In conclusion, the appeal was disposed of with modifications in the penalty amount, setting aside the interest demand, and upholding the penalty for certain violations.