2019 (2) TMI 24 - AT - Service Tax

Penalty u/r 15 (3) of CCR, 2004 - Ineligible CENVAT Credit of SAD (Special Additional Duty) availed - entire demand along with interest was paid prior to the issuance of SCN - Section 73(3) of the Finance Act - Held that - Section 73(3) is very clear as it states that if tax is paid along with interest before issuance of SCN, the SCN shall not be issued - In this case, also, as soon as the audit pointed out the wrong availment of credit, the appellant reversed the same along with interest before the issuance of SCN - Further, except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression or concealment of facts to evade payment of tax. The imposition of penalty under Rule 15 (3) of CCR, 2004 is not justified and bad in law in view - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of appellant's appeal by Commissioner (A)
- Availing ineligible credit on SAD and CENVAT credit on ineligible input service
- Confirmation of demand, appropriation of credit, interest, and penalty
- Applicability of Section 73(3) of the Finance Act
- Imposition of penalty under Rule 15(3) of CCR, 2004
- Allegation of suppression of facts by the appellant
- Justification of penalty imposition
- Lack of finding on suppression of fact by Commissioner (A)

Analysis:

The appeal was filed against the rejection of the appellant's appeal by the Commissioner (A) concerning the availing of ineligible credit on Special Additional Duty (SAD) and CENVAT credit on an ineligible input service. The Department had noticed the wrongful credit availment during a verification, leading to the recovery of the amounts. A Show Cause Notice (SCN) was issued, and the Order-in-Original confirmed the demand, appropriated the total CENVAT credit, imposed penalty under Rule 15(3) of CCR, 2004, and interest. The appellant contended that the demand along with interest was paid before the SCN issuance, invoking Section 73(3) of the Finance Act. The appellant argued that no SCN should have been issued, and penalty imposition was unjustified, citing relevant case laws.

The appellant further argued that there was no suppression of facts, as the credit taken was disclosed in their returns. They relied on case laws to support their claim that without a positive act of suppression, the extended period of limitation cannot be invoked. The Tribunal considered the submissions, material on record, and relevant provisions of the Finance Act. It noted that Section 73(3) states that if tax is paid with interest before SCN issuance, the SCN shall not be issued. In this case, the appellant reversed the credit with interest upon audit observation, before the SCN. The Tribunal found no material proving suppression or concealment of facts by the appellant to evade tax. It held that the penalty imposition under Rule 15(3) of CCR, 2004 was unjustified, as there was no finding of suppression by the Commissioner (A). Relying on cited decisions, the Tribunal set aside the impugned order and allowed the appeal of the appellant.

In conclusion, the Tribunal found in favor of the appellant, emphasizing compliance with Section 73(3) of the Finance Act, absence of suppression of facts, and lack of justification for penalty imposition. The decision highlighted the importance of proper appreciation of facts and law in such cases, ultimately leading to the reversal of the impugned order.