2017 (5) TMI 447 - AT - Service Tax

Levy of penalty - amount of CENVAT credit reversed but without interest - credit of service tax paid under reverse charge mechanism - service provider should have paid 25% service tax whereas the service provider has paid 100% of service tax; and the service receiver, the appellant has taken cenvat credit of entire amount of said service tax paid by the service provider - Held that - When the assessee appellant has not paid the interest part of the demand confirmed by the lower revenue authorities, there is no merit in this appeal for setting aside the penalties imposed by the lower revenue authorities - penalties upheld - decided against assessee.

Summary

Issues:
Appeal against demand of Cenvat Credit of Service Tax, imposition of penalties, excess availment of CENVAT Credit, payment of interest, imposition of penalty, applicability of case laws.

Analysis:
The appellant, M/s Navdurga Ispat Pvt Ltd., appealed against two orders confirming the demand of Cenvat Credit of Service Tax, along with penalties imposed. The issue revolved around the appellant being a service receiver and taking excess CENVAT Credit due to the service provider paying 100% instead of the required 25% of service tax. The excess CENVAT Credit amounted to ?4,03,100/- and ?2,35,709/- in the two appeals, leading to disallowance by lower revenue authorities and imposition of penalties equating to 50% of the confirmed demands.

The appellant relied on a Tribunal decision in a similar case, while the Revenue cited various case laws to support their stance. After considering the submissions and case laws, the Member (Technical) concluded that the appellant was required to deposit 75% of the service tax as per a specific notification. Although the appellant reversed the 75% of CENVAT Credit initially taken, they failed to pay the interest on the confirmed demand. The issue of penalties arose, with the appellant arguing for their dismissal, countered by the Revenue highlighting the potential loss of excess service tax refund if not for the audit revealing the contravention by the appellant.

Ultimately, the Member (Technical) found no merit in setting aside the penalties, as the appellant had not paid the interest on the confirmed demand, and the cited case laws did not support dropping the penalties. Consequently, both appeals were rejected, upholding the impugned orders and sustaining the penalties. The judgment was pronounced in open court on 18.01.2017.