2018 (5) TMI 921 - AT - Service Tax

Excess utilisation of CENVAT credit beyond the limit of 20% - Imposition of equivalent penalty u/s 7B - storage and warehousing services - Held that - appellant on being pointed out has discharged the service tax liability as worked out by the Revenue and had paid the differential amount of ₹ 29,295/- and interest was paid before the adjudication was taken up - the argument of the learned counsel needs to be accepted that there is no reason for them to not to pay the tax; also that they could have entertained a bonafide belief that the amount charged by them could be covered under cargo handling services for which tax liability was discharged - provisions of Section 80 can be invoked in this case and the penalty can be set aside. Excess utilization of CENVAT credit - Held that - Utilisation of CENVAT credit in excess of 20% could be a procedural infraction but definitely not an evasion of tax which is the requirement for imposition of equivalent amount of penalty. If the entire amount of the differential utilisation of CENVAT credit along with interest stands deposited before the adjudication proceedings, the provisions of Section 80 needs to be invoked in this case. Penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Imposition of penalties under Section 7B for non-discharge of tax on storage and warehousing services and cargo handling services.
2. Dispute regarding the imposition of equivalent penalty amount on the tax liability confirmed against the assessee.

Analysis:
1. The first issue pertains to the imposition of penalties under Section 7B for non-discharge of tax on storage and warehousing services and cargo handling services. The appellant contested the show-cause notice, arguing that they had discharged the service tax liability for cargo handling services and disputed the levy on storage and warehousing services. The adjudicating authority confirmed the demand, interest, and imposed a penalty. The 1st appellate authority upheld the tax liability and interest but reduced the penalty. The appellant argued that they paid the tax liability on storage and warehousing services during adjudication and requested the penalty to be set aside. The counsel contended that the excess utilization of CENVAT credit was a technical error that was rectified by paying the excess amount with interest. The Revenue argued for the imposition of an equivalent penalty amount on both issues, relying on a court decision. However, the Tribunal found that there was no intention to evade tax, and the penalty under Section 78 was not justified. The penalties were set aside under Section 80, as there was a justifiable reason for the actions taken by the appellant.

2. The second issue involves the dispute over the imposition of an equivalent penalty amount on the tax liability confirmed against the assessee. The Revenue contended that penalties should be imposed for non-discharge of tax liabilities in a timely manner. The appellant argued that the excess utilization of CENVAT credit was a procedural infraction and not tax evasion, as the entire demanded amount was paid before adjudication. The Tribunal agreed with the appellant's arguments, invoking Section 80 to set aside the penalties. Consequently, both the Revenue's and the appellant's appeals seeking equivalent penalty amounts were rejected. The appellant's appeal was allowed, and the Revenue's appeal was dismissed.

In conclusion, the Tribunal upheld the appellant's arguments regarding the penalties imposed for non-discharge of tax liabilities on storage and warehousing services and cargo handling services. The penalties were set aside under Section 80, as there was no evidence of tax evasion and the demanded amounts were paid before adjudication. The appeals were disposed of accordingly, with the appellant's appeal allowed and the Revenue's appeal rejected.