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2019 (5) TMI 155 - AT - Service TaxPenalty u/s 78(1) of the Finance Act 1994 read with Rule 15 of CENVAT Credit Rules 2004 - wrongly availed CENVAT Credit reversed on being pointed out with applicable interest - No intent to evade - period involved was 2011-12 to September 2015 - HELD THAT - Merely because service tax was paid or ineligible CENVAT credit was reversed prior to the show-cause notice, it does not absolve the assessee from the liability to penalty. The facts in each case have to be examined individually. The department s contention is that there was suppression of facts in this case. Clearly, there was a mistake by the respondent in availing CENVAT credit. The department is free, while assessing returns, to call for further information and decide if there are errors/discrepancies. The mere fact that the break-up of the CENVAT credit availed was not given by the assessee cannot be held against them when the law does not require them to give this breakup. On the other hand, the conduct of the assessee as has been correctly recorded by the First Appellate Authority, in this case, does not indicate that they had any intention to evade payment of duty or to commit a fraud or had wilfully suppressed facts to evade payment of service tax. Penalty cannot be sustained - appeal dismissed - decided against Revenue.
Issues:
1. Imposition of penalty under Section 78 of the Finance Act for availing ineligible CENVAT credit. 2. Dispute regarding suppression of facts and intention to evade payment of tax. 3. Applicability of penalty when tax and interest are paid before the issuance of a show-cause notice. Analysis: 1. The appeal was filed by the Revenue against the order-in-appeal seeking to deny CENVAT credit availed on rent-a-cab services and event management services by the respondents. The First Appellate Authority partially set aside the penalty imposed under Section 78(1) of the Finance Act 1994, citing the absence of fraud, collusion, or wilful misstatement. The Revenue contested this decision, arguing that the payment made by the appellant was not voluntary and that non-disclosure of correct information constitutes suppression of facts justifying the penalty. The Tribunal noted that the appellant had reversed the credit and paid the tax along with interest upon audit findings, emphasizing that the imposition of penalty hinges on the intent to evade payment of duty. The Tribunal upheld the First Appellate Authority's decision, stating that the appellant's cooperation and immediate corrective actions did not demonstrate an intention to evade tax. 2. The Revenue contended that the mere reversal of ineligible CENVAT credit before the show-cause notice does not absolve the assessee from penalty liability. They argued that the respondent's failure to provide a detailed breakdown of CENVAT credit availed on input services in their ST-3 returns indicated a mistake in availing the credit. However, the Tribunal emphasized that the law does not mandate such a breakdown in returns and that the appellant's filing of correct values in the returns did not imply an intent to evade tax. The Tribunal agreed with the First Appellate Authority's assessment that there was no evidence of deliberate suppression of facts or fraudulent intent by the appellant. Therefore, the Tribunal upheld the impugned order, rejecting the Revenue's appeal and confirming the decision to set aside the penalty. 3. The Tribunal clarified that the imposition of penalty under Section 78 is contingent upon the presence of fraud, collusion, or wilful misstatement, which was not established in this case. The Tribunal referenced judgments from the High Courts of Delhi, Andhra Pradesh, and Madras to support the decision that immediate corrective actions by the appellant upon audit findings, along with cooperation with the investigation, do not warrant penalty imposition. The Tribunal concluded that the appellant's actions did not indicate an intention to evade tax, leading to the rejection of the Revenue's appeal and the upholding of the First Appellate Authority's decision to set aside the penalty.
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