2018 (11) TMI 1518 - AT - Service Tax

Demand of Interest with recovery of credit - irregular availment of CENVAT credit - appellant had sufficient balance in its Cenvat account - Rule 14 of the Cenvat Credit Rules, 2004 - Held that - It is admitted fact on record that the credit availed by the appellant had not been utilized for payment of service tax on the output service. Thus the provisions of Rule 15 of the rules cannot be sustained for imposition of equal amount of penalty, inasmuch as there was no intention on the part of the appellant to defraud the Government revenue by availing the irregular Cenvat Credit - the penalty imposed in the impugned order cannot stand for judicial scrutiny and accordingly, the same is liable to be set aside. Penalty set aside - the matter is remanded to the original authority for verification of records and proper fact finding regarding reversal of Cenvat Credit, as claimed by the appellant - appeal allowed by way of remand.

Summary

Issues:
1. Irregular Cenvat Credit availed by the appellant during April 2012 to March 2015.
2. Discrepancy in reflecting reversal particulars in service tax returns.
3. Imposition of penalty on the appellant.

Analysis:
1. The appellant had availed irregular Cenvat Credit for Service Tax paid on input services during the period in question, which was later reversed but not reflected in the service tax returns. The Service Tax Department noticed this discrepancy during an audit, leading to a show cause notice for recovery of the wrongly availed credit, interest, and penalty. The adjudication confirmed the proposals in the notice, which were partially modified by the Commissioner (Appeals) by setting aside the interest demand in the impugned order. The appellant challenged the penalty imposition in the appeal before the Tribunal.

2. The appellant argued that although the Cenvat Credit had been reversed in the account, the reversal particulars were not reflected in the ST-3 returns due to an oversight. The Tribunal opined that the matter should be sent back to the original authority for verification of the reversal particulars. Since the availed credit was not utilized for paying service tax on output services, the Tribunal found that the penalty under Rule 15 of the Cenvat Credit Rules, 2004, could not be sustained as there was no intention to defraud the government revenue. Consequently, the Tribunal held that the penalty imposed in the impugned order was not justifiable and set it aside.

3. In conclusion, the Tribunal disposed of the appeal by remanding the matter to the original authority for verifying the records and facts related to the reversal of Cenvat Credit claimed by the appellant. Additionally, the Tribunal set aside the penalty imposed on the appellant.