2014 (6) TMI 134 - AT - Service Tax

CENVAT Credit - demand of interest towards amount paid using cenvat credit - omission in the return regarding cenvat details due to system error - Held that -appellant had maintained the CENVAT credit account and they have taken the credit on the relevant dates and they have also made debit entries and they have also reflected the same in the column 4a and 4b. The only problem that has arisen is column 5a and 5b of the return could not be filled because of the difficulty in taking opening balance and difficulty in making entries. According to Rule 9 of CCR, what is required for availing CENVAT credit is, input service should have been received, the documents should be the one which are recognized as acceptable for availing CENVAT credit and input services should have been utilized for providing the output services. There is not even a whisper about any problem in these areas. If there is substantive compliance with the law and in fact the services have been received and credit entries and debit entries are made in the returns, in our opinion, just because of some omission in the returns, there cannot be a situation wherein an assessee is to be treated as not having paid the service tax at all. Unfortunately, there is no penal provision invoked and no penalty has been imposed, which in our opinion could have been justified especially in view of the arguments advanced by the learned AR that the assessee is at fault since when they faced problems in filing the returns on system, they could have filed returns manually and in such a case legally they would have been perfectly correct. - Decided in favour of assessee.

Summary

Issues:
1. Liability to pay interest on CENVAT credit utilization during a specific period due to filing errors in returns.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bangalore involved a case where the appellant faced a demand for interest on the CENVAT credit utilized during a particular period due to errors in filing returns. The appellant had mistakenly shown '0' in columns meant for credit taken and utilized in the returns filed from April 2010 to March 2011. The appellant explained that this error occurred as the system did not accept the opening balance figures. Subsequently, they rectified the situation by taking the entire credit amount in April 2011 and showing it as a debit entry. The Superintendent of Central Excise demanded interest on the amount utilized, leading to an appeal before the Commissioner(Appeals), who upheld the demand for interest.

Upon hearing both sides, the Tribunal noted that the appellant did not contest the issue based on the absence of a show-cause notice. While the returns reflected debit entries, columns 5a & 5b showed '0,' indicating no balance in the CENVAT credit account. The Department's stance was that interest was payable, considering the mismatch in the returns. However, the appellant argued that the filing errors were due to system issues, supported by a Chartered Accountant's certificate. The Tribunal observed that the appellant had maintained the CENVAT credit account, received input services, and utilized them for output services, meeting the Rule 9 requirements. Despite the return discrepancies, the Tribunal disagreed with the Revenue's position on interest payment, emphasizing substantive compliance with the law and actual service tax payments.

The Tribunal highlighted that no penal provisions were invoked, even though the Revenue argued for interest payment. While acknowledging the appellant's ability to file returns manually, the absence of penalties prevented further action. Ultimately, the Tribunal allowed the appeal, emphasizing the appellant's compliance with the law despite filing errors and the lack of penal impositions. The judgment underscored the importance of substantive compliance and the limitations in penal actions without specific provisions being invoked.