2017 (4) TMI 803 - AT - Service Tax

CENVAT credit - input service - GTA service for transportation of goods from the factory of the appellant to the buyers - whether appellant is liable to pay interest for the intervening period or not and in the facts and circumstances of the case, penalty is imposable on the appellant or not? - Held that - the Cenvat credit account was lying unutilized and therefore, interest is not payable by the appellant - With regard to penalty, from April, 2010, there was an amendment in the Rules that the appellant was not entitled for Cenvat credit on the outward agency service, the appellant is not entitled to avail Cenvat credit on the transportation charges. In these circumstances, the penalty is imposable on the appellant. The appellant has paid the amount of Cenvat credit before adjudication, the penalty is reduced to 25% of the duty amount. Appeal disposed off - decided partly in favor of assessee.

Summary

Issues:
Appeal against denial of Cenvat credit on GTA service for transportation of goods, liability to pay interest, and imposition of penalty.

Analysis:
The appellant contested the denial of Cenvat credit on outward GTA service, arguing that since the credit was not utilized and they had a sufficient balance, interest should not be payable. The appellant also claimed that due to doubt regarding entitlement to the credit, penalty should not be imposed or should be reduced. The AR opposed, citing a Madras High Court decision, asserting that interest is payable and penalty is justified due to the appellant's awareness of the rule.

The Tribunal considered the submissions and the main issues of interest liability and penalty imposition. Regarding interest, it was noted that if Cenvat credit taken wrongly but reversed before utilization, interest is not payable. As the appellant's unutilized credit was reversed, interest was deemed not payable. However, on penalty, it was found that the appellant did not include transportation cost in the assessable value, making them ineligible for the credit. Consequently, penalty imposition was upheld.

Moreover, the Tribunal observed that the appellant had paid the Cenvat credit before adjudication, leading to a reduction in the penalty to 25% of the duty amount as per the proviso to Section 11AC of the Act. Thus, the penalty was adjusted accordingly. The appeal was disposed of with these findings, emphasizing the reduction of penalty and the non-liability for interest due to the reversal of the credit.