2019 (9) TMI 113 - AT - Central Excise

CENVAT Credit - suppression of facts for non-payment of service tax under reverse charge basis - Rule 9(1)(bb) of Cenvat Credit Rules, 2004 - HELD THAT - Though the matter was investigated by the Preventive Officer but after pointing out the non- payment of service tax, the appellant have admittedly paid the amount along with the interest and penalty under Section 76, thereafter, neither any SCN was issued nor any adjudication order was passed on the issue of non-payment of service tax. Consequently the proceeding, as regard the demand of service tax came to an end. This closer itself shows that there is no suppression of facts involved. Since, there is no case being covered under proviso under Section 73(1), there is no suppression Moreover, the department itself in writing asked the appellant to pay the penalty under Section 76, otherwise in case of suppression of facts the provision of Section 78 is invokable which was neither invoked nor asked to pay the penalty under Section 78. These undisputed facts clearly show that there is no suppression of facts on the part of the appellant for non-payment of Service Tax. Rule 9(1)(bb) cannot be invoked, accordingly, the denial of cenvat credit is not tenable - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of Cenvat credit under Rule 9(1)(bb) for alleged suppression of facts in non-payment of service tax under reverse charge basis.

In this case, the appellant was alleged to have not paid service tax on certain services, which was later pointed out by the Preventive Officer during a factory visit. The appellant then paid the service tax, interest, and penalty under Section 76, and the case was closed without a show cause notice being issued. However, a show cause notice was later issued to deny Cenvat credit under Rule 9(1)(bb) due to alleged suppression of facts. The appellant argued that since they paid the tax after inquiry and no SCN was issued, there was no suppression of facts. The appellant also contended that the demand was time-barred as the credit was availed before the SCN was issued. The Revenue reiterated the findings of the impugned order.

Upon hearing both sides, the Tribunal found that the denial of credit was solely based on invoking Rule 9(1)(bb). The Tribunal noted that the appellant had paid the tax, interest, and penalty without any SCN or adjudication order on non-payment of service tax, leading to the closure of the proceedings. It was emphasized that the absence of an SCN indicated no suppression of facts. The Tribunal highlighted that if there was indeed suppression, the department should have issued an SCN invoking Section 73(1) proviso, which was not done. Additionally, the department had asked for penalty under Section 76, not Section 78 for suppression of facts, further indicating no suppression. Consequently, the Tribunal held that Rule 9(1)(bb) could not be invoked, and the denial of Cenvat credit was deemed untenable. As a result, the impugned order was set aside, and the appeal was allowed.