2021 (8) TMI 1417 - AT - Service Tax

Cenvat credit - input services used for trading business - compliance with Rule 6(3) - penalty - change in law affecting service classification - HELD THAT - Learned counsel assailing the penalty states that due to the change in law, which have not come in notice, neither there was any advisory by the department, nor any public notice was given in the news paper by the Department, thus it is a case of venial breach of law and there is no contumacious conduct on the part of the appellant. Accordingly, he prays for setting aside the penalty. He further relies on the Division Bench ruling of the Tribunal in the case of Hindustan Antibiotics Ltd. V/s Commissioner of C. EX. 2015 (9) TMI 1581 - CESTAT MUMBAI . I hold that it is a case of venial breach and there is no contumacious conduct on the part of the appellant. Penalties imposed are set aside and appeals are allowed. Appellants are entitled for consequential relief, in accordance with law.

Summary

Issues involved: Cenvat credit on common input services in trading business, compliance with Rule 6(3), penalty imposition, change in law affecting service classification.

Summary:
The Appellate Tribunal CESTAT ALLAHABAD, presided over by HON'BLE MR. ANIL CHOUDHARY, considered the case where the appellant, engaged in motor vehicle and business auxiliary service, had taken cenvat credit on common input services due to their trading business in automobiles. Following a change in the law exempting trading as a service, the appellant inadvertently failed to reverse proportionate cenvat credit as required by Rule 6(3). Upon being alerted by the Revenue, the appellant rectified the error by reversing the appropriate credit and paying the prescribed interest. The Commissioner (Appeals) set aside the demand but upheld the penalty, noting the breach of law despite compliance with Rule 6(3).

The appellant argued that the penalty should be set aside due to the change in law not being adequately notified by the department, leading to a venial breach without contumacious conduct. Reference was made to a Division Bench ruling in Hindustan Antibiotics Ltd. v/s Commissioner of C. EX., Pune 2016 (42) S.T.R. 387 (Tri.-Mumbai) to support the argument.

After considering the arguments, the Tribunal found it to be a case of venial breach without contumacious conduct on the part of the appellant. Consequently, the penalties were set aside, and the appeals were allowed, entitling the appellants to consequential relief as per the law. The order was dictated and pronounced in open court.