2015 (12) TMI 85 - AT - Service Tax

Denial of CENVAT Credit - Reverse charge mechanism - Held that - There is no dispute about the admissibility of credit. Learned advocate submits that though the credit was taken prior to the deposit of same, but the credit was never utilized by them. It is a bona fide interpretation of law and no penalty should be imposed upon them on that ground. - Inasmuch as the entire credit was availed by reflecting the same on the statutory records and issue being bona fide interpretation of the provisions of law, no mala fide can be attributed to the appellant so as to invoke the penal provisions against them. - appellant was entitled to the credit and no penalty was to be imposed upon him - Decided in favour of assessee.

Summary

Issues Involved:
Availment of Cenvat credit before paying Service Tax, imposition of penalty.

Analysis:
The appeal before the Appellate Tribunal CESTAT NEW DELHI involved a single issue regarding the appellant's availing of Cenvat credit amounting to &8377; 5,28,389/- for GTA services during April 2005 to July 2005, on a reverse charge basis. The Service Tax in question was duly paid by the appellant by the stipulated due date. The Revenue objected to the appellant availing the Cenvat credit before the actual payment of Service Tax, leading to the imposition of penalty equivalent to the Service Tax amount along with interest.

Upon hearing both parties, it was noted that there was no dispute regarding the admissibility of the credit. The appellant's representative argued that although the credit was taken before the actual deposit of the Service Tax, it had not been utilized. The appellant's action was considered a bona fide interpretation of the law, and it was contended that no penalty should be levied solely on that basis. The appellant had already paid the interest and was not contesting the same, with the challenge being directed solely towards the imposition of the penalty.

The Tribunal observed that the appellant had not utilized the credit before the due date but had recorded the same in the statutory records and had already deposited the interest amount. It was highlighted that the issue stemmed from a genuine interpretation of the legal provisions, indicating no malafide intent on the appellant's part to warrant penal consequences. Consequently, the Tribunal held that the appellant was rightfully entitled to the credit, and no penalty should be imposed. As a result, the appeal was allowed, granting consequential relief to the appellant.

In conclusion, the Tribunal's decision emphasized the importance of assessing the circumstances surrounding the availing of Cenvat credit in relation to the payment of Service Tax, highlighting the significance of bona fide interpretation of legal provisions in determining the applicability of penalties in such cases.