2018 (4) TMI 662 - Commission - Service Tax

Application of settlement of a case - Supply of Tangible Goods service - input tax credit - Section 32E (1) of the Central Excise Act, 1944 - Held that - Had investigating officers found their Cenvat credit claim in order, the available Cenvat credit would have proposed for appropriation towards their Service Tax liability. Bench finds that due to non-filing of ST-3 returns at relevant time and non-production of original duty paying document and Cenvat register evidencing availment and debit of Cenvat credit from their Cenvat credit account, the claim of availability of Cenvat credit of ₹ 83,67,707/to them in their Cenvat credit account is not legally tenable. Applicant has himself claimed in their reply that the said amount of Cenvat credit is available to them. They have not stated that the said amount of Cenvat credit was availed and utilized by them. Moreover, the issue regarding determining the admissibility of Cenvat credit to the applicant is not before the Bench, since the said issue has not been raised in the impugned SCN. The applicant by wrongly claiming the said payment has in fact defaulted in making true disclosures of facts. The claimed CENVAT credit which is neither shown as availed nor utilized in the statutory records like, ST-3 returns/ CENVAT Register and disputed by Revenue, cannot be considered as valid payment towards their Service Tax liability. The Bench do not find it a fit case for settlement under Section 32F(5) of the Central Excise Act, 1944 as made applicable to Service Tax matters under Section 83 of the Finance Act, 1994 since the applicant has not paid the entire accepted Service Tax liability along with applicable interest. The application filed by the applicant M/S. Rajasthan Crane Services is rejected as under Section 32E (1) of the Central Excise Act, 1944 as made to Service tax matters under Section 83 of the Finance Act, 1994 - application dismissed.

Summary

Issues Involved:
1. Evasion of Service Tax
2. Non-filing of ST-3 Returns
3. Non-payment of collected Service Tax to the Government Treasury
4. Eligibility and verification of Cenvat credit
5. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994
6. Request for waiver of penalties and immunity from prosecution

Detailed Analysis:

1. Evasion of Service Tax:
The applicant, M/S. Rajasthan Crane Services (RCS), was engaged in providing hydraulic cranes on hire for construction activities. They collected service tax from clients but failed to deposit it with the government. The Service Tax liability was calculated to be ?1,88,23,722 for the period 2008-09 to 2012-13. The investigation revealed that RCS had not filed any ST-3 returns and had not paid the collected service tax, thereby evading tax payment.

2. Non-filing of ST-3 Returns:
RCS did not file the required ST-3 returns for the period from 2008-09 to 2012-13. This non-compliance was a significant issue as it concealed the actual service tax liability from the authorities. The applicant later filed the returns on 20-10-2013, after the initiation of the investigation.

3. Non-payment of collected Service Tax to the Government Treasury:
Despite collecting service tax from their clients, RCS did not deposit the amount with the government. They paid a part of the liability amounting to ?1,03,88,821 during the investigation, but the remaining amount was still due.

4. Eligibility and verification of Cenvat credit:
RCS claimed to have paid ?1,05,23,636 in cash and ?83,67,707 through Cenvat credit. However, the Revenue could not verify the Cenvat credit due to the non-submission of relevant documents by RCS. The applicant failed to provide the Cenvat registers and original invoices for verification. The Bench concluded that the claimed Cenvat credit was not legally tenable as it was neither shown as availed nor utilized in the statutory records.

5. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The show cause notice proposed penalties under Sections 76, 77, and 78 for failure to pay service tax, non-filing of returns, and suppression of facts with the intent to evade tax. The applicant requested a waiver of penalties and immunity from prosecution, citing cooperation with the investigation and payment of dues.

6. Request for waiver of penalties and immunity from prosecution:
RCS requested a waiver of penalties and immunity from prosecution, arguing that they had paid the service tax and interest and had cooperated with the authorities. However, the Bench found that RCS had not paid the entire accepted service tax liability along with applicable interest and had not complied with the directions to submit relevant documents for verification.

Conclusion:
The Bench rejected the application for settlement under Section 32E (1) of the Central Excise Act, 1944, as made applicable to service tax matters under Section 83 of the Finance Act, 1994. The rejection was based on the applicant's failure to pay the entire service tax liability and interest and non-compliance with document submission requirements. The order emphasized the importance of fulfilling statutory obligations and providing accurate and verifiable records to the authorities.