2016 (2) TMI 219 - AT - Service Tax

Demand of interest on reversal of cenvat credit - reversal of credit against refund claim - The appellant vehemently argues that their initial excess payment of service tax on receipt of input services from their foreign counterpart was unintentional and mainly because of wrong calculations; after the payment of the excess service tax they had taken the CENVAT credit for the same. - Held that - strictly speaking do not clearly prove that the CENVAT credit taken on the excess payment of service tax was in the strict category of wrongly taken or utilized CENVAT credit and more so in the light of decision of the Hon ble Karnataka High Court s decision in the case of CCE vs. Bill Forge 2011 (4) TMI 969 - KARNATAKA HIGH COURT - provisions of Rule 14 of CENVAT Credit Rules, 2004 for recovery of interest on the subject CENVAT credit amount will not be attracted. - demand set aside - Decided in favor of assessee.

Summary

Issues:
Initial excess payment of service tax, taking CENVAT credit of excess payment, refund claim acceptance, recovery of interest, imposition of penalty, interpretation of Rule 14 of CENVAT Credit Rules, 2004, applicability of case laws.

Analysis:

Initial Excess Payment and CENVAT Credit:
The appellant made an unintentional excess payment of service tax and subsequently took CENVAT credit for the same. The Revenue claimed the CENVAT credit was irregularly taken, leading to a refund claim and a subsequent show-cause notice for interest recovery and penalty imposition.

Interpretation of Rule 14 of CENVAT Credit Rules, 2004:
The Revenue argued that Rule 14 mandates recovery of wrongly taken or utilized CENVAT credit with interest. The appellant contended that no wrong credit was taken, citing a sufficient credit balance in their CENVAT account and relied on case laws to support their stance.

Case Laws and Legal Precedents:
The appellant referenced judgments like CCE vs. Bill Forge Pvt. Ltd. to argue against interest liability for the CENVAT credit transaction. The Revenue cited UOI vs. Ind-Swift Laboratories Ltd. to support their position on recovery of wrongly taken credit with interest, emphasizing the legal provisions under Sections 73 and 75 of the Finance Act.

Judicial Interpretation and Decision:
The Tribunal analyzed the facts, noting the technical flaw in the excess payment and subsequent CENVAT credit. While acknowledging the irregularity, the Tribunal found no malafide intent or revenue loss, leading to a conclusion that Rule 14 was not strictly applicable. The Tribunal highlighted the timing of actions taken by the appellant in response to departmental requests and emphasized the absence of clear evidence of wrongful credit utilization.

Conclusion:
Based on the analysis and legal interpretations, the Tribunal ruled in favor of the appellant, stating that the recovery of interest and penalty under Rule 14 and Rule 15 of CENVAT Credit Rules, 2004 was unwarranted. The appeal by M/s. TNT (I) Pvt. Ltd. was allowed, and the decision was pronounced in open court.