2008 (7) TMI 104 - AT - Service Tax

Appellant reversed credit which they had taken on dredging services on being pointed out by audit party - There is no evidence of utilisation of any input service tax credit to the above extent by the Port Trust for payment of service tax on output services (Port Services) - Hence demand cannot be sustained revenue plea to impose penalty u/s 76 is rejected because section 76 could be invoked only against a defaulter of service tax payment

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery of demanded amount under Section 73 of the Finance Act, 1994.
2. Imposition of penalty under Section 76 of the Act.
3. Admissibility of CENVAT credit on dredging services.
4. Utilization of input service tax credit.
5. Appeal for enhancement of penalty by the department.

Analysis:
1. The appellant, M/s. Tuticorin Port Trust, sought waiver of pre-deposit and stay of recovery of Rs. 2,17,63,128/- demanded by the Commissioner under Section 73 of the Finance Act, 1994 along with a penalty of Rs. 87,05,251/- imposed under Section 76 of the Act. The Tribunal noted that the appellant had initially taken CENVAT credit on dredging services but reversed it upon objection by the audit party. The demand made by the Commissioner was based on the availment of inadmissible credit, but there was no evidence of utilization of this credit for service tax payment on output services. Therefore, the demand was deemed unsustainable on factual and legal grounds.

2. Regarding the imposition of penalty under Section 76 of the Finance Act, 1994, the Tribunal found that this provision could only be invoked against a defaulter of service tax payment. Since there was no evidence of default by the Port Trust in service tax payment, the Tribunal dismissed the Revenue's case for imposing the penalty. Consequently, the appeal filed by the Port Trust was allowed, and the department's appeal was dismissed.

3. The Tribunal emphasized that the department's appeal for enhancement of the penalty was also considered for summary disposal. However, given the lack of evidence supporting the imposition of penalty on the Port Trust, the Tribunal upheld its decision to allow the Port Trust's appeal and dismiss the department's appeal. The judgment was dictated and pronounced in open court, providing a clear and final resolution to the issues raised in the case.