2014 (10) TMI 717 - AT - Service Tax

Suo moto credit - earlier when objected by the department, assessee reversed the credit with interest - after winning the appeal he took the re-credit of amount reversed earlier with interest - Held that - When service tax was not liable to be paid, assessee should not have been made to pay. Having made them to pay, credit should have been allowed gracefully. Having denied the credit, when they won the appeal, they should have been advised to reverse the suo moto credit taken and file a refund claim which they would have done since when department wrote a letter asking them whether they have taken suo moto credit, time was still available for filing refund claim. When advice was given to the assessee it was a wrong advice which resulted in proceedings initiated by the department itself. When advice was required to be given, no advice was given instead proceedings were initiated. To add insult to injury, Penalty that too mandatory penalty was imposed. We find approach of the department is not at all correct. Strictly speaking, legally, the credit of interest on CENVAT credit availed is also wrong because only credit could have been taken which was reversed at the insistence of the department and not the interest paid. Nevertheless in this case since the entire proceedings was unnecessary and whole litigation process was unnecessary and the amount recovered itself was not at all recoverable, we consider that at some stage the matter should be closed - there is absolutely no revenue loss caused to the Revenue so far - Decided in favour of assessee.

Summary

Issues:
1. Appellant's payment of service tax under protest and subsequent denial of CENVAT credit.
2. Show-cause notice for irregular CENVAT credit availed by the appellant.
3. Adjudication order demanding recovery of irregular CENVAT credit, interest, and penalty.
4. Appeal before the Commissioner (Appeals) and setting aside of the adjudication order.
5. Department's show-cause notice proposing recovery of suo moto credit taken by the appellant.
6. Adjudication order disallowing the credit, demanding recovery, and imposing penalty.
7. Denial of suo moto credit availed by the appellant and proposed recovery.
8. Legal implications of the department's actions and the need for resolution.

Analysis:
1. The appellant, a public limited company, paid service tax under protest for services received prior to 10.09.2004, following departmental pressure. Subsequently, CENVAT credit was denied due to the service tax being deemed non-liable. The appellant reversed the credit and paid interest, leading to a show-cause notice for irregular credit availed. The adjudication order confirmed the demand, which was contested through an appeal to the Commissioner (Appeals).

2. The Commissioner (Appeals) set aside the adjudication order, allowing the appellant a refund of the amounts paid. However, a subsequent show-cause notice alleged irregular CENVAT credit availed by the appellant, leading to an adjudication order demanding recovery, interest, and imposing a penalty under the CENVAT Credit Rules, 2004.

3. The issue revolved around the denial of suo moto credit by the department and the proposed recovery. The tribunal highlighted the unjust actions of the department, emphasizing that the appellant should not have been made to pay the service tax if it was not liable. The tribunal criticized the department's overzealous revenue collection approach and the incorrect advice provided, leading to unnecessary litigation and financial burden on the appellant.

4. Despite legal technicalities, the tribunal considered the peculiar circumstances of the case and allowed the appeal, hoping for a peaceful resolution without further appeals. The tribunal noted that there was no revenue loss to the government, emphasizing the need for a fair and just conclusion to the matter, providing consequential relief to the appellant.

This detailed analysis of the judgment highlights the sequence of events, legal implications, and the tribunal's critical assessment of the department's actions, ultimately leading to the decision in favor of the appellant.