2019 (10) TMI 889 - AT - Service Tax

Imposition of penalty - Wrong availment of credit - Man-power Supply Agency Services provided - appellant has reversed the entire wrongly availed credit along with interest before issuance of show-cause notice - intent to evade present or not - HELD THAT - As per sub-section (3) of section 73, no SCN is to be issued when the credit is reversed on being pointed out by officers of the department. The present SCN has been issued alleging for fraud and suppression of facts on the appellants. The suppression alleged by the department is that while reversing the wrongly availed credit, the appellant has not reversed the entire amount. This cannot be considered as positive act of suppression of facts with intention to evade payment of service tax - Moreover, when the audit party pointed out the error, they reversed the entire amount. The entire figures were correctly reflected in the accounts of the appellant. There are no ingredients to attract sub-section (4) of section 73 of the Finance Act, 1994 - penalty not warranted - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Wrong availment of credit leading to penalty imposition.
2. Interpretation of relevant sections of the Finance Act, 1994.
3. Allegations of fraud and suppression of facts.
4. Justification of penalty imposition by the department.

Analysis:

1. The case involved the appellants engaged in providing Man-power Supply Agency Services facing objections during an audit regarding the wrong availment of credit. After reversing the credit along with interest, a show-cause notice was issued proposing a penalty for the wrongly availed credit. The original authority imposed a penalty, which was later reduced by the Commissioner (Appeals) to 50%. The appellants appealed to the Tribunal challenging the penalty imposition.

2. The appellant's counsel argued citing relevant sections of the Finance Act, 1994, specifically focusing on sub-sections (3) and (4) of Section 73. The appellant had paid the wrongly availed credit along with interest before the show-cause notice was issued, emphasizing that penalty liability arises only upon the determination of tax amount as per section 78(1). The absence of a tax determination in this case, coupled with the lack of findings on intention to evade payment of service tax, led to the plea for setting aside the penalty.

3. The Authorized Representative supported the penalty imposition, alleging that the appellant's actions showed an intention to evade service tax payment. It was argued that the appellant only reversed the entire wrong credit after being pointed out by the audit party, indicating fraudulent behavior. The department contended that the penalty was legal and proper based on these grounds.

4. Upon hearing both sides, the Tribunal noted that the appellant had reversed the entire wrongly availed credit with interest before the show-cause notice was issued. Referring to the relevant sections, the Tribunal found no evidence of intentional suppression of facts to evade tax payment. The Tribunal held that the penalty was unwarranted, as the appellant had rectified the error promptly and maintained accurate accounts. Consequently, the penalty was set aside, and the appeal was allowed with any necessary consequential reliefs.

In conclusion, the Tribunal's decision focused on the lack of evidence supporting fraudulent intent or suppression of facts by the appellants, leading to the setting aside of the penalty imposed for the wrongly availed credit.