2015 (1) TMI 1092 - AT - Service Tax

CENVAT Credit - excess utilization of credit more than 20% - Cargo handling service - Imposition of penalty - Held that - In the absence of detailed information regarding the amount payable every month, the credit available every month, the amount of services provided in DTA, non-taxable services, etc., no conclusion can be reached and no details have been made available in the appeal memorandum. Nevertheless, the one claim made by the learned counsel appears to be a reasonable proposition. The learned counsel submitted that at best the appellants can be said to be liable to pay interest for the amount which was paid from Cenvat credit amount instead of making payment in cash to discharge their service tax liability. - The stand taken by the department which in our opinion is legally correct, would result in a situation where the appellants have to deposit the entire amount of service tax utilized in excess of 20% but they can take back the credit into their account and utilize the same for subsequent period. That being the position, obviously if we require the appellant to pay interest on the excess utilization, it would reduce the complications involved in making payment in cash and taking back the Cenvat credit thereafter and would reduce work for all concerned. In Solar Chemferts Pvt. Ltd. case reported in 2011 (6) TMI 640 - CESTAT, MUMBAI , this Tribunal took a similar view in respect of the contravention of Rule 8(3) of Central Excise Rules. In our opinion, it would be appropriate to follow the same in this case also. Appellants are directed to calculate the amount payable as interest because of excess utilization of credit and make payments of the same. At present, the requirement of pre-deposit in excess of the interest payable is waived and stay against recovery is granted till the directions hereinabove are complied with and a final order about finalizing the stay application is passed by this Tribunal. - Decided partly in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing appeal for Prathyusha Associates Shipping.
2. Early hearing application for Sravan Shipping Services.
3. Utilization of Cenvat credit beyond prescribed limits.
4. Consideration of cargo handling service as exempted service.
5. Invocation of extended period for demand confirmation.
6. Bona fide belief and liability assumptions.
7. Revenue neutrality argument and liability for interest.
8. Imposition of penalties and compliance directives.

Analysis:

1. Condonation of Delay: The Tribunal condoned the delay of 61 days in filing the appeal for Prathyusha Associates Shipping due to reasonable explanations provided by the appellants regarding an accident and difficulty in locating papers, allowing the appeal to proceed.

2. Early Hearing Application: Sravan Shipping Services sought early hearing based on a previous order granting liberty to the Revenue for realizing adjudicated liability during a stay petition's pendency. The Tribunal allowed the early hearing application in conjunction with the stay application.

3. Cenvat Credit Utilization: Appellants utilized Cenvat credit beyond the permissible limit during 10/2005 to March 2008 for service tax payment, leading to demand confirmation and penalties. The Tribunal emphasized the necessity of maintaining separate accounts for non-taxable services and prescribed limits for credit utilization under Cenvat Credit Rules.

4. Exempted Service Classification: The Tribunal considered cargo handling service for export goods as an exempted service, despite arguments to the contrary, based on the definition of "exempted service" under Cenvat Credit Rules.

5. Invocation of Extended Period: The Tribunal upheld the invocation of the extended period for demand confirmation, highlighting the importance of reflecting details of non-taxable services in ST-3 returns and the responsibility of the assessee in tax assessment matters.

6. Bona Fide Belief and Assumptions: The Tribunal rejected the appellants' claim of bona fide belief regarding the tax liability, emphasizing the necessity of understanding and complying with tax laws without assumptions, especially in service tax matters.

7. Revenue Neutrality and Interest Liability: Despite arguments for revenue neutrality and minimal revenue loss, the Tribunal directed the appellants to calculate and pay interest for excess credit utilization within a specified timeframe, emphasizing compliance and verification.

8. Penalties and Compliance Directives: The Tribunal waived the pre-deposit requirement in excess of interest payable, granting a stay against recovery until compliance with payment directives, including verification by the adjudicating authority and subsequent final decision.

This comprehensive analysis of the judgment from the Appellate Tribunal CESTAT BANGALORE covers the various issues addressed and decisions made regarding the appeals brought before the Tribunal.