2018 (7) TMI 703 - AT - Service Tax

Imposition of penalty - no suppression of facts - tax with interest paid on being pointed out - Held that - Admittedly the factum of providing maintenance services and the receipt of consideration for the same was a part of the appellant s business records. The appellant admitted their tax liability and paid major amount even prior to the show cause notice. To that extent, imposition of penalty upon him is not justified. As regards the balance amount the appellant have paid the same before the adjudication order - The penalty is required to be imposed when an assessee acts with a mala fide intention to evade payment of duty. In the present case the appellant having reflected their activities in their books of accounts, it cannot be held that there was any intention on their part to evade payment of duty. Penalties set aside - demands along with interest confirmed - appeal allowed in part.

Summary

Issues involved:
1. Availment of excess Cenvat credit for machinery parts manufacturing.
2. Non-payment of Service Tax for maintenance services.
3. Imposition of penalty for Cenvat credit and Service Tax issues.

Analysis:

Availment of excess Cenvat credit:
The appellant, engaged in manufacturing machinery parts for sugar mills, inadvertently availed excess Cenvat credit of ?2,14,336.00. This mistake was discovered during a record audit, and the appellant promptly paid the duty by reversing the credit along with interest. The appellant argued that no show cause notice should have been issued, and penalty imposition was unwarranted as it was a clerical mistake. The Tribunal noted that the error was likely a clerical one without mala fide intent, occurring only in May 2015. Considering the immediate reversal of credit upon discovery, the Tribunal held that penalty imposition was unjustified as the payment of interest itself was penal in nature.

Non-payment of Service Tax for maintenance services:
The appellant provided maintenance services attracting Service Tax but faced financial constraints, leading to non-payment of ?8,53,753.00. The audit team detected this non-payment, following which the appellant admitted liability and deposited ?5,77,258/- along with interest before the show cause notice. The remaining amount was paid before adjudication. The appellant argued that the delay in payment was not intentional evasion but a financial delay. The Tribunal agreed that the payment of interest was penal in nature and, citing precedents, held that unless there was mala fide intent, penalties should not be imposed. The Tribunal noted that the appellant reflected the services in their records, indicating no intention to evade payment.

Imposition of penalty for Cenvat credit and Service Tax issues:
The Tribunal emphasized that penalties are warranted when there is a mala fide intention to evade duty payment. In this case, as the appellant maintained proper records and admitted tax liability, penalties were deemed unjustified. Confirming the demands along with interest, the Tribunal set aside the penalties imposed, allowing the appeal on that basis.

This judgment highlights the importance of intent in penalty imposition for tax-related issues and underscores the significance of immediate rectification and cooperation upon the discovery of errors.