2018 (9) TMI 89 - AT - Service Tax

Input Service Credit - The Department alleged that appellant has wrongly availed input service tax credit for a period October, 2007 to June, 2012 - Reversal already made by way of deposit - SCN dated 16.07.2015 was served upon the appellant raising a demand of service tax under proviso to Section 73(1) of the Act read with Rule 14 of Cenvat Credit Rules, 2004 (CCR for short) alongwith the equal amount of interest and penalty. Held that - It is appellant s own admission that he wrongly availed the credit. Thus, the demand confirmed for one year by the Order under challenge has no infirmity nor while limiting the same to normal period of one ear. It is also apparent from record that the appellant deposited the said wrongly availed credit only after the Department brought it to the appellant s notice. However, the simultaneous fact is that the time of filing the ST-3 return for the period of October, 2008 to July, 2012 qua the said utilisation had not yet expired. The said ST return was filed on 24.04.2013 since the credit availed was being returned on 16.04.2013, i.e. prior filing of return, it is clear that the stage of suppressing the fact as alleged by the Department has not yet come - the deposit by way of reversal cannot be held to be a delayed deposit. Thus, question of any interest and penalty thereof does not at all arise. The Order under challenge confirming the said demand however limiting it to the normal period of one year is though upheld but demand of equal amount of penalty and of applicable interest is set aside - Appeal allowed in part.

Summary

Issues:
- Alleged wrongful availment of input service tax credit
- Show Cause Notice raising a demand of service tax under proviso to Section 73(1) of the Act
- Appeal filed challenging the Order of original Adjudicating Authority
- Reduction of demand, interest, and penalty by Commissioner (Appeals)
- Appellant's submission of not utilizing the cenvat credit
- Department's justification for dismissing the Appeal
- Applicability of cenvat credit for service providers
- Timeliness of the Show Cause Notice
- Sustainment of demand for one year
- Appropriation of deposited amount

Analysis:
The appellant, engaged in providing taxable services, was alleged to have wrongly availed input service tax credit for a specific period. A Show Cause Notice was issued, leading to a demand of service tax, interest, and penalty. The original Adjudicating Authority confirmed the demand, which was then upheld by the Commissioner (Appeals) with a reduction in the amount. The appellant contended that the cenvat credit was not utilized and that the demand was not sustainable, primarily due to a deposit made prior to the Show Cause Notice. The Department, however, supported the dismissal of the Appeal.

Regarding the cenvat credit eligibility for service providers, it was noted that the appellant did not dispute the wrongful availment of the credit. The appellant had deposited the disputed amount before the Show Cause Notice was issued and had informed the Department accordingly. The Adjudicating Authorities recognized this deposit. The Order under challenge reduced the demand due to the limitation period, ultimately leading to a demand of &8377; 76,711. The main consideration was whether this demand for one year was justified, along with the associated interest and penalty.

The Court found that the appellant's admission of wrongly availing the credit supported the demand for one year. The timing of the deposit, made before the Show Cause Notice and the filing of the ST return, indicated that there was no intent to suppress information. As a result, the deposit reversal was not considered delayed, and no interest or penalty was deemed applicable. The demand was upheld for one year but the penalty and interest were set aside. The Court directed the appropriation of &8377; 76,711 from the already deposited amount of &8377; 1,60,000. The Appeal was partially allowed, with the judgment pronounced on 23.08.2018.