2016 (11) TMI 21 - AT - Service Tax

Connivance with service provider for evasion of service tax - availing inadmissible CENVAT credit - Manpower or Supply Agency Services - Extended period of limitation - demand of duty with interest - imposition of penalty - Held that - the Show Cause Notice did not bring forward any evidence to establish that there has been collusion between the appellant and the service provider for evasion of Service Tax and for availing inadmissible Cenvat credit. Therefore, the invocation of extended period in the said Show Cause Notice is not sustainable. We, therefore, hold that the said Show Cause Notice, so far as, relates to denial of Cenvat credit to the appellant, imposition of penalty on appellant, proposal for imposition of penalty on its Authorized Signatory & proposal of demanding interest from the appellant is unsustainable. We, therefore, modify the impugned Order-in-Original to the extent that the demand confirmed in respect of Cenvat credit of ₹ 3,32,76,600/- is set aside, order for recovery of interest on the said demand is set aside, imposition of penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Alleged wrongful availing of Cenvat credit
- Allegation of collusion with service provider for evasion of Service Tax
- Imposition of penalties on the appellant and its Authorized Signatory

Analysis:
1. Alleged wrongful availing of Cenvat credit:
The appellant, a manufacturer of home appliances, availed Cenvat credit based on invoices from a manpower supplier, M/s BVI HR Practice Private Limited. The Revenue alleged that BVI did not pay the Service Tax as stated on the invoices, leading to a Show Cause Notice for recovery of wrongly availed Cenvat credit. The Original Authority confirmed the demand and penalties, but the appellant contended that they followed all prescribed rules and that it was not their responsibility to ensure the service provider's tax payments. The Tribunal found that the Show Cause Notice lacked evidence of collusion between the appellant and the service provider, thus setting aside the demand for Cenvat credit and associated penalties.

2. Allegation of collusion with service provider for evasion of Service Tax:
The Revenue alleged collusion between the appellant and the service provider for evasion of Service Tax and inadmissible Cenvat credit, invoking an extended period for the Show Cause Notice. However, the Tribunal found no evidence to support this allegation, leading to the conclusion that the extended period was not justified. As a result, the Tribunal held that the denial of Cenvat credit, penalties on the appellant, and the proposed penalties were unsustainable, ultimately setting them aside.

3. Imposition of penalties on the appellant and its Authorized Signatory:
The Original Authority imposed penalties on the appellant and its Authorized Signatory for the alleged wrongful availing of Cenvat credit. However, the Tribunal, after considering the arguments and lack of evidence supporting collusion, set aside the penalties imposed on the appellant and its Authorized Signatory. The Tribunal emphasized that the Show Cause Notice failed to establish any collusion, leading to the decision to allow both appeals and overturn the penalties imposed.

In conclusion, the Tribunal found in favor of the appellant, setting aside the demand for Cenvat credit, penalties, and interest, as the Show Cause Notice lacked evidence of collusion and did not justify the imposition of penalties. The Tribunal's decision highlighted the importance of evidence and adherence to legal provisions in matters concerning Cenvat credit and tax compliance.