2014 (8) TMI 300 - AT - Service Tax

Disallowance of CENVAT Credit - penalty imposed under Rule 15(3) - Held that - It is observed from the ground of appeal filed by the appellant that no reasons have been given as to how Cenvat Credit is admissible to them and as to why the order passed by the First Appellate Authority is not acceptable. So far, imposition of penalties upon the appellant is concerned, the issue of chargeability of interest was under litigation and has been settled only by an order passed by Hon ble Supreme Court in the case of UOI vs. Ind-Swift Laboratories Ltd. The entire Cenvat Credit taken by the appellant already stands reversed. In the facts and circumstances of the case, no penalty is attracted against the appellant under the Finance Act 1994. Penalties imposed upon the appellant are, therefore, set aside and appeal to that extent only is required to be allowed - Decided partly in favour of assessee.

Summary

Issues:
1. Admissibility of Cenvat Credit
2. Imposition of penalties on the appellant
3. Chargeability of interest on irregularly taken Cenvat Credit

Admissibility of Cenvat Credit:
The appellant filed an appeal regarding the disallowance of Cenvat Credit amounting to Rs. 17,59,889, out of which Rs. 2,67,982 was utilized. The Adjudicating Authority disallowed the entire credit and imposed penalties. The First Appellate Authority set aside the penalty under Rule 15(3) of the Cenvat Credit Rule 2004 but upheld the rest of the order. The appellant did not appear during the hearings, and no reasons were provided for the admissibility of the credit. The lower authorities confirmed the interest on the reversed Cenvat Credit based on the judgments of the Hon'ble Supreme Court and Madras High Court.

Imposition of Penalties:
The issue of imposing penalties was under litigation and was settled by the Hon'ble Supreme Court's judgment in a specific case. Since the entire Cenvat Credit was already reversed by the appellant, no penalty was deemed applicable under the Finance Act 1994. Consequently, the penalties imposed were set aside, and the appeal was allowed to that extent.

Chargeability of Interest on Irregularly Taken Cenvat Credit:
The appellant voluntarily reversed the Cenvat Credit, leading to a discussion on the chargeability of interest. The interest was confirmed by the lower authority based on established legal precedents from the Hon'ble Supreme Court and Madras High Court. The appeal was allowed only concerning the imposition of penalties, with the interest on the reversed Cenvat Credit being correctly upheld.

Conclusion:
The appeal filed by the appellant was allowed to the extent indicated above, with penalties being set aside due to the voluntary reversal of the Cenvat Credit and the absence of chargeability under the Finance Act 1994. The interest on the irregularly taken Cenvat Credit was confirmed based on established legal judgments.