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2019 (6) TMI 794 - AT - Service TaxPenalty u/r 15 (3) of the Cenvat Credit Rules, 2004 and section 78 of FA - CENVAT Credit - reversal of credit in terms of Rule 6(3) of the CENVAT Credit Rules, 2004 - HELD THAT - It is a matter of record that before the Audit party visited the appellant between 27.10.2010 to 02.11.2010, the appellants have already reversed back the cenvat credit amounting to ₹ 50,25,246/- in compliance to the requirement of Rule 6(3) of Cenvat Credit Rules, 2004 and same was reflected in the financial accounts including the balance sheet for financial year 2009-2010. It was only on comparison of balance sheet and the ST 3 returns which have been filed by the appellant that the Audit party pointed out that the reversed back amount of Cenvat credit has not been shown as reversed back in their ST 3 return for the relevant period. The appellant while filing ST 3 return for period covering October, 2010 to March, 2011, which was filed on 25 April, 2011, the reversal of Cenvat credit amounting to ₹ 50,25,246/- had properly been reflected in the ST 3 return. Equal amount of penalty under Rule 15 (3) of the Cenvat Credit Rules, 2004 - HELD THAT - The intention of the appellant have never been to misuse the cenvat credit or evade service tax on account of same and therefore, primarily we feel that since they have already reversed the cenvat credit and have also paid interest, there was no need to issue show cause notice left aside invoking the provisions of Rule 15 (3) of the Cenvat Credit Rules, 2004 for imposition of equal amount of penalty. Penalty u/s 78 - HELD THAT - The facts in this matter indicate that the appellant on its own reversed back the cenvat credit and has reflected the same in their financial books of accounts. There have also been correspondence between the officers of the Department and the appellant which indicate that the appellants have always having credit in their account much more than what was required to be reversed and if such credit have been reversed on its own by the appellant, it will amount to non-taking of the cenvat credit. Since the original amount of credit was already reversed as the assessee had claimed that they always had credits in accounts much above the required amount, the credits in a way have not been utilized by the assessee. The penalty under section 78 of Finance Act, 1994 read with Rule 15(3) of Cenvat Credit Rules, 2004 is not imposable in the facts of this matter - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Reversal of Cenvat Credit 2. Imposition of Interest 3. Imposition of Penalty under Section 78 of Finance Act, 1994 4. Adjudicating Authority's Jurisdiction Detailed Analysis: 1. Reversal of Cenvat Credit: The appellant reversed Cenvat credit amounting to ?50,25,246/- as per Rule 6(3) of the CENVAT Credit Rules, 2004, but failed to reflect this reversal in their ST-3 returns for the financial years 2008-2009 and 2009-2010. The reversal was later shown in the ST-3 return for October 2010 to March 2011, filed on 25 April 2011. The appellant maintained that there was no negative credit in their books, and the balance of Cenvat credit was always more than the required reversal amount. 2. Imposition of Interest: The Department issued a show cause notice on 20.03.2013, demanding the reversed Cenvat credit and interest of ?7,78,260/- under Section 75 of the Finance Act, 1994 read with Rule 14 of Cenvat Credit Rules, 2004. The appellant had already deposited the interest amount on 31.03.2012 under pressure from the Department. The appellant argued that since the credit was taken but not utilized, interest was not applicable, citing the judgment in Commissioner of Central Excise and Service Tax, LTU Bangalore vs. Bill Forge Pvt. Ltd. 3. Imposition of Penalty under Section 78 of Finance Act, 1994: The adjudicating authority imposed a penalty of ?50,25,246/- under Section 78 of the Finance Act, 1994 read with Rule 15(3) of Cenvat Credit Rules, 2004, despite this provision not being invoked in the show cause notice. The appellant contested this penalty, arguing that there was no fraud, misstatement, or intent to evade duty, and the reversal was reflected in their financial statements before the audit. They cited several judgments, including Spectrum Power General Ltd. vs. CCE & Cus & ST Hyderabad and Puspam Pharmaceuticals Co. vs. CCE, Bombay, to support their claim that the penalty was not applicable in their case. 4. Adjudicating Authority's Jurisdiction: The Tribunal noted that the adjudicating authority had overstepped by imposing a penalty under Section 78 of the Finance Act, 1994, which was not mentioned in the show cause notice. The Tribunal emphasized that the appellant had reversed the credit and paid the interest before the show cause notice was issued, indicating no intent to misuse the Cenvat credit or evade service tax. The Tribunal referenced the judgment in M/s. Grasim Bhiwani Textiles Ltd. vs. CCE, Rohtak, which held that penalties are unwarranted when there is no suppression or misstatement with the intent to evade duty. Conclusion: The Tribunal concluded that the penalty under Section 78 of the Finance Act, 1994 read with Rule 15(3) of Cenvat Credit Rules, 2004, was not imposable given the facts of the case. The appellant had already reversed the Cenvat credit and paid the interest, demonstrating no intent to evade duty. The impugned order-in-original was set aside, and the appeal was allowed. (Pronounced in the open Court on 17.06.2019)
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