2006 (2) TMI 69 - AT - Service Tax

Appellants have missed the bus by first reversing the credit on a mere letter from Superintendent and not approaching the higher authorities for redressal of their grievance - availment of the suo motu recredit of reversed credit not allowed However appeal in respect of penalty is allowed

Summary

Issues: Disallowance of Modvat credit on inputs, Reversal and recredit of Modvat credit, Legitimacy of suo moto recredit, Application for benefit before availing credit, Imposition of penalty

The judgment involves an appeal against the disallowance of Modvat credit on certain inputs, where the appellant reversed the credit on the direction of the Range Superintendent but later recredited the amount. The appellant argued that the credit was eligible and recredit was within the law. The Departmental Representative contended that suo moto recredit was not permissible without prior permission. The Tribunal noted the appellant's blind reversal of credit on the Superintendent's letter, indicating uncertainty about credit eligibility. It emphasized the need for a show cause before such reversals. The Tribunal held that the appellant's failure to protest or seek redressal from higher authorities precluded their claim for credit. Citing precedents, the Tribunal rejected the appellant's suo moto credit claim and upheld the disallowance. However, it set aside the penalty imposed, considering the appellant's actions as a knee-jerk reaction, not warranting punishment. The appeal on penalty was allowed, while the appeal on suo moto credit was dismissed.

In conclusion, the Tribunal upheld the disallowance of Modvat credit on suo moto credit but set aside the penalty, emphasizing the need for proper procedures and redressal avenues before reversing credits or claiming recredit without permission.