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2018 (8) TMI 1468 - AT - Service TaxDemand of Interest and penalty - wrongful availment of CENVAT credit - the appellants have reversed the CENVAT credit availed on being pointed out by the audit - Held that - The assessee has reversed the service tax credit of ₹ 7,95,153/- vide CENVAT register document No.100116412 dated 23.2.2016 - Further, the appellant has also submitted a Chartered Accountant certificate which is on record and the Chartered Accountant has certified the reversal of credit of ₹ 7,95,153/- in the month of February, 2016 and he has also certified the extract of CENVAT credit register as well as the Service Tax returns for the period October 2015 to March 2016. In the case of Commissioner of Central Excise vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT , the Hon ble High Court of Karnataka has held that if the credit availed is reversed without utilization then interest and penalty cannot be levied. Interest and penalty not levied - appeal allowed - decided in favor of appellant.
Issues:
- Liability for duty, interest, and penalty under CENVAT Credit Rules, 2004 and Finance Act, 1994. - Reversal of CENVAT credit by the appellant. - Applicability of interest and penalty when credit is reversed without utilization. Analysis: 1. Liability for duty, interest, and penalty: The case involved the appellant providing airport services, where non-usable inventory was identified and provisioned for write-off. The audit revealed a credit availed on the provisions, leading to a demand for duty, interest, and penalty under relevant provisions of the CENVAT Credit Rules, 2004 and the Finance Act, 1994. The Assistant Commissioner confirmed the demand, which was upheld by the Commissioner (A) in the impugned order. 2. Reversal of CENVAT credit: The appellant reversed the wrongly availed CENVAT credit upon audit observation and informed the authorities accordingly. The appellant contended that the reversal was made promptly and communicated to the service tax audit authorities. However, the Commissioner (A) observed that the reversal was not reflected in the service tax return, which the appellant argued was beyond the scope of the show-cause notice. 3. Applicability of interest and penalty: The appellant argued that the availed CENVAT credit was not utilized as there was a sufficient balance available, negating the need for interest and penalty. Citing judicial precedents, the appellant contended that if credit is reversed before utilization and there is a balance in the CENVAT account, interest and penalty should not be imposed. The Tribunal agreed with this argument, emphasizing that the appellant had reversed the credit, maintained sufficient balance, and disclosed the same in the returns, aligning with the legal principles established in relevant case laws. 4. Judgment: After considering submissions and evidence, the Tribunal found in favor of the appellant. The Tribunal noted the reversal of credit, certification by a Chartered Accountant, and sufficient balance in the CENVAT account. Relying on legal precedents, the Tribunal held that if credit is reversed before utilization with a balance in the account, interest and penalty should not be imposed. Consequently, the impugned order was set aside, allowing the appeal of the appellant with any consequential relief. In conclusion, the judgment focused on the timely reversal of CENVAT credit, the availability of balance, and the legal position regarding the imposition of interest and penalty in such cases. The decision highlighted the importance of compliance with procedural requirements and the relevance of established legal principles in determining liability under the relevant statutes.
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