2008 (6) TMI 161 - AT - Service Tax

Application for waiver of penalties suo moto credit - bona fide belief that they were not covered under category of Clearing & Forwarding Agent service and hence they took the credit of the service tax paid by them, which ought not to have been done by them - There is prima facie case for imposition of penalty - Therefore, stay is granted partly

Summary

Issues:
1. Appellant's liability to pre-deposit penalties imposed under Cenvat Credit Rules and Finance Act.
2. Appellant's claim for waiver of penalties based on bona fide belief and time bar.
3. Allegation of suppression of facts by the appellant.
4. Imposition of penalties and pre-deposit requirements.

Analysis:

1. Liability to Pre-deposit Penalties: The appellant was required to pre-deposit penalties of Rs. 3,96,744/- under Cenvat Credit Rules and Rs. 25,000/- under the Finance Act. The appellant had taken Cenvat credit on the belief that it was permissible for their activity as 'Consignment Agents.' However, the Tribunal held that the appellants cannot take suo motu Cenvat credit, even though they had paid the Service Tax and later returned the credit. The Tribunal found a prima facie case for the imposition of penalties, directing the appellant to pre-deposit a sum of Rs. 1,00,000/- towards penalty within two months, with waiver of the balance of penalties upon such deposit.

2. Claim for Waiver Based on Bona Fide Belief and Time Bar: The appellant's counsel argued that they acted under a bona fide belief that their activity fell under the category of Clearing & Forwarding Agent service, thereby justifying their initial Cenvat credit claim. The appellant also pleaded time bar, stating that the Show Cause Notice was issued after they had filed returns and availed the credit. However, the Tribunal considered the appellant's belief as not justifiable for taking the credit, leading to the imposition of penalties. The appellant's plea for waiver based on bona fide belief and time bar was not accepted.

3. Allegation of Suppression of Facts: The Respondent alleged clear suppression of facts by the appellant, stating that they were not entitled to take suo motu credit. The Respondent argued that the imposition of penalties was justified due to this suppression. The Tribunal considered this argument in conjunction with the appellant's actions and concluded that penalties were warranted based on the circumstances of the case.

4. Imposition of Penalties and Pre-deposit Requirements: In another stay application with similar penalties, the Tribunal directed the appellant to pre-deposit Rs. 25,000/- within two months, with waiver of the balance of penalty upon such deposit. The recovery was stayed until the disposal of the appeal, emphasizing compliance with the pre-deposit requirements. The Tribunal set a timeline for compliance and warned of dismissal of the appeal in case of failure to deposit the required amount.

This detailed analysis of the judgment highlights the issues of liability, waiver claims, suppression of facts, and the Tribunal's decisions regarding penalties and pre-deposit requirements in the respective cases.