2018 (7) TMI 78 - AT - Service Tax

Penalty - wrongful availment of CENVAT Credit - construction services - no intent to evade - Held that - It is brought out from records that the appellant had disclosed the wrongly availed credit in their ER 1 Returns. This fact indicates that the appellant had no intention to evade payment of duty and the credit was availed under the wrong impression of law - there is no evidence brought forth to establish suppression of facts or intention to evade payment of tax on the part of the appellant - penalty not warranted - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of CENVAT credit on construction services for setting up a factory after a specific period.
2. Imposition of penalty for alleged suppression of facts and intention to evade payment of duty.

Analysis:
1. The case involved the appellant, engaged in cement manufacturing, availing CENVAT credit on capital goods, inputs, and input services as per the Cenvat Credit Rules, 2004. The appellant received various goods for setting up new cement factories and availed credit of service tax paid on construction services for a specific period. However, the department contended that the appellant was not eligible for the credit post the specified period. The appellant reversed the credit upon realizing the error and disclosed it in their ER-1 Returns. A show cause notice was issued alleging suppression of facts to evade duty, leading to the imposition of penalty.

2. The appellant challenged only the penalty imposed, not disputing the demand or interest. The appellant's counsel argued that the credit reversal with interest upon discovering the error demonstrated good faith and no intention to evade payment. They cited precedents to support their stance. The department reiterated the findings of the impugned order. The Tribunal observed that the appellant's disclosure in the ER-1 Returns indicated no intent to evade duty. The immediate reversal of credit with interest further supported the appellant's good faith. The Tribunal found no evidence of suppression or intention to evade tax, leading to the setting aside of the penalty.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty and allowing the appeal with any consequential reliefs. The judgment highlighted the importance of good faith actions, immediate rectification of errors, and the absence of evidence for allegations of suppression or intention to evade tax in determining the imposition of penalties in tax matters.