2015 (1) TMI 1184 - AT - Service Tax

Demand of interest and penalty on reversal of CENVAT Credit - payment of service tax on Manpower Recruitment Agency Service and taking cenvat credit of the same - Held that - In this case the respondent has paid the service tax and taken suo motu credit. Although the respondent has committed an error, which was rectified immediately on pointing out by the department, therefore, it cannot be said that the respondent was having any malafide intention to avail inadmissible credit. Moreover, during the argument, the ld. AR submits that the amount of service tax paid by the respondent has already been refunded. This also supports the fact that there was no intention of the respondent to take inadmissible credit. In these circumstances, the Commissioner (Appeals) has rightly dropped the penalty against the respondent. Therefore, I do not find any infirmity in the impugned order, same is upheld - Decided against Revenue.

Summary

Issues:
Appeal against dropped penalty by Commissioner (Appeals) on respondent for taking Cenvat credit of service tax paid under Manpower Recruitment Agency Service.

Analysis:
The judgment involves an appeal by the Revenue against an order where the penalty imposed on the respondent by the Adjudicating Authority was dropped by the Commissioner (Appeals). The respondent had paid service tax under Manpower Recruitment Agency Service, took credit in books, and later reversed it upon notification by the department. The Adjudicating Authority then imposed a penalty on the respondent, which was subsequently dropped by the Commissioner (Appeals) and challenged by the Revenue in the present appeal.

The ld. AR argued that as per Rule 9 of the CENVAT Credit Rules, 2004, the respondent was not entitled to take Cenvat credit of the service tax paid under the mentioned service category. The Adjudicating Authority imposed the penalty on the respondent based on this argument. However, upon review, it was observed that the respondent rectified the error promptly after being notified by the department. The respondent's immediate action upon notification, along with the fact that the service tax amount had already been refunded, indicated no malafide intention to claim inadmissible credit. Consequently, the Commissioner (Appeals) dropped the penalty against the respondent.

After considering the facts of the case and the arguments presented, the judge concluded that there was no evidence of any malafide intention on the part of the respondent to claim inadmissible credit. The immediate rectification of the error and the refund of the service tax amount supported the respondent's position. Therefore, the judge upheld the decision of the Commissioner (Appeals) to drop the penalty and dismissed the appeal filed by the Revenue, finding no fault in the impugned order.