2018 (7) TMI 1205 - AT - Central Excise

Adjustment of amount of service tax paid against the demand of Central Excise duty - taxability of developing charges received for moulds - appellant claimed that they were under the bonafide belief that the amount received towards mould developing charges are in the nature of service and were liable for payment of Service Tax - penalty - Held that - This issue is fully covered by the decision of this Tribunal in the case of M/s K.R. Packaging 2017 (2) TMI 893 - CESTAT NEW DELHI , where it was held that no duty is leviable as the Department never raised any objection which is an implied consent for having the Service Tax from the assessee-appellants. While demanding Central Excise duty appellants are eligible for adjustment of amount already paid as service tax. Accordingly, the demand is reduced by the amount so paid - penalty not warranted as the issue involved is interpretational one. Appeal allowed - decided in favor of appellant.

Summary

Issues: Liability for payment of Central Excise duty, adjustment of service tax paid, penalty under Section 11AC

Liability for Payment of Central Excise Duty:
The appellant, engaged in the manufacture of Shoe Heels, received advance payment for developing moulds used in manufacturing. Central Excise Officers observed that no excise duty was paid on this advance payment, considering it liable for duty at the rate applicable to the manufactured goods. The appellant contended that they believed the charges for mould development were a service, and they had already started paying service tax. The show cause notice proposed a duty demand for the period 2009-2014, penalties, and interest. The Assistant Commissioner upheld the demand, penalties, and interest. The Commissioner (Appeals) dismissed the appeal, stating the taxability of the charges was not in dispute, and the service tax already paid could not be adjusted against excise duty.

Adjustment of Service Tax Paid:
The appellant argued that they should be allowed to adjust the service tax already paid against the excise duty demand. They claimed that both taxes were received by the same Department of Revenue, and there was no dispute on the liability for excise duty payment. The Tribunal referred to a previous decision where it was held that no double jeopardy should apply when an assessee had already paid service tax in good faith. The Tribunal concluded that the excise duty demand should be reduced by the amount of service tax already paid.

Penalty under Section 11AC:
The appellant contended that penalties should be set aside as the dispute was based on the interpretation of Central Excise Law, with no malafide intent. The Tribunal agreed, noting that the issue was a matter of interpretation, and no malafide intent was found. Therefore, the penalty under Section 11AC was set aside along with the demand for excise duty. The appeal was allowed, and the appellant was entitled to consequential relief.

This judgment highlights the importance of considering adjustments for taxes paid in good faith, the interpretation of tax laws, and the applicability of penalties based on intent in excise duty cases.