2016 (5) TMI 230 - AT - Service Tax

Levy of equal penalty u/s 78 of the Finance Act, 1994 - Invokation of Section 80 ibid - Reversal of excess Cenvat credit availed along with interest under protest before issuance of SCN - Held that - there is no suppression of facts with an intention to evade payment of duty, as the respondent has paid the service tax and interest by showing their Bonafides. Therefore, a reasonable cause is present to invoke Section 80 ibid and the penalty is waived of. - Decided against the revenue

Summary

Issues:
1. Availing excess CENVAT Credit.
2. Willful suppression in availing CENVAT credit.
3. Penalty imposition under Section 78 of the Finance Act, 1994.
4. Applicability of waiver of penalty under Section 80 of the Finance Act, 1994.

Issue 1: Availing excess CENVAT Credit
The case involved M/s. Cognizant Technology Solutions availing excess CENVAT Credit of ?13,69,210, which was noticed during a Service Tax audit. The Respondent agreed to the observation, reversed the credit, and paid interest under protest before a Show Cause Notice was issued. The Respondent argued that interest is not applicable if the credit is not utilized, and there was no willful suppression as details were provided during refund claims.

Issue 2: Willful suppression in availing CENVAT credit
The original adjudicating authority levied a penalty equal to the tax due, citing willful suppression by the Respondent. The Commissioner (Appeals) disagreed, invoking Section 73(3) of the Finance Act, 1994, and waived the penalty under Section 80, relying on a precedent. The Appellant challenged this decision, arguing that suppression was evident, and penalties should not be waived.

Issue 3: Penalty imposition under Section 78 of the Finance Act, 1994
The Revenue contended that penalties should be imposed due to wrong CENVAT Credit availed without disclosure. They cited a case to support their stance that penalties should not be avoided even if the tax was paid before a Show Cause Notice. The Appellant argued for equal penalty imposition, referencing a High Court ruling on suppression and concealment.

Issue 4: Applicability of waiver of penalty under Section 80 of the Finance Act, 1994
The Respondent argued that unintentional mistakes in availing CENVAT Credit should not attract penalties, citing a case precedent. They emphasized their cooperation with authorities and the absence of willful suppression. The Tribunal found no suppression, supporting the waiver of penalties under Section 80, distinguishing it from the case law relied upon by the Appellant.

In the final judgment, the Tribunal rejected the Department's appeal, stating that the Respondent's case lacked merit. The Tribunal highlighted the distinction between the Central Excise Act and the Finance Act, 1994 regarding the waiver of penalties. It concluded that the Respondent's actions did not indicate willful suppression, justifying the invocation of Section 80 of the Finance Act, 1994 for penalty waiver. The Tribunal's decision was based on previous rulings and the absence of intentional evasion by the Respondent.