2018 (5) TMI 782 - AT - Service Tax

Short payment of service tax - demand alongwith interest - It was observed by the Officers of Service Tax Department that as the head office (Unit-I) had no balance in its Cenvat account, it cannot pay Service Tax from the said account and is required to pay the same in cash - Held that - proceedings initiated against the appellant for recovery of the wrongly availed /utilized cenvat credit by the authorities below is proper and justified. Since the appellant had deposited such amount subsequently, it is liable to pay interest for the days of delay in payment / reversal of the cenvat amount - Time limitation - Held that - the appellant had never voluntarily disclosed its modus operandi adopted to the Department. Since the Department gathered the information upon investigation into the matter, the show cause proceedings initiated by the Department will not be hit by the bar of limitation. Penalties u/s 76 and 78 - Held that - Since penalties cannot be imposed simultaneously under the said statutory provisions, the penalty imposed under Section 76 has to be set aside - Since the entire disputed amount of Cenvat Credit was reversed before issuance of show cause notice and the appellant had reflected the transactions in the ST-3 returns, as per the amended provisions of Section 78 of the Act, the penalty should be reduced to 50% of the quantum of penalty confirmed by the authorities below. Appeal allowed in part.

Issues:
1. Utilization of Cenvat credit from one unit's account for payment of Service Tax by another unit.
2. Validity of penalties imposed under Sections 76 & 78 of the Finance Act, 1994.
3. Bar of limitation for initiating show cause proceedings.

Analysis:

Issue 1: Utilization of Cenvat credit from one unit's account for payment of Service Tax by another unit
The appellant, engaged in manufacturing, availed Cenvat Credit for Central Excise duty and service tax on input services. The dispute arose when the Service Tax Department observed that the appellant's head office (Unit-I) had utilized Cenvat credit from another factory's (Unit-III) account to pay Service Tax. The Department contended that since Unit-I had no balance in its Cenvat account at the time of payment, it was improper. The appellant argued that all units were under one entity, allowing cross-utilization of credits. The Tribunal held that the appellant's actions were not in conformity with statutory provisions. However, considering the subsequent deposit of the amount and lack of voluntary disclosure, the Tribunal found the appellant liable for interest but reduced the penalty under Section 78 of the Act.

Issue 2: Validity of penalties imposed under Sections 76 & 78 of the Finance Act, 1994
Penalties were imposed under both Sections 76 & 78 of the Finance Act, 1994. The Tribunal noted that penalties cannot be imposed simultaneously under these provisions. As per statutory requirements, the penalty under Section 76 was set aside, and the appellant was held liable to pay penalty under Section 78. The Tribunal further reduced the penalty amount to 50% of the irregularly availed Cenvat credit by the appellant, in line with amended provisions of Section 78.

Issue 3: Bar of limitation for initiating show cause proceedings
The appellant contended that the proceedings were time-barred. The Revenue argued that the show cause notice was issued within the stipulated time after verification of ST-3 Returns. The Tribunal found that the Department's actions were not barred by limitation, as the information was gathered through investigation, and the proceedings were initiated in a timely manner.

In conclusion, the Tribunal set aside the impugned order to the extent of penalty under Section 76 and modified the penalty amount to 50% of the irregularly availed Cenvat credit. The appeal was disposed of accordingly.

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