2019 (12) TMI 590 - AT - Service Tax

CENVAT Credit - appellant providing Supply of Tangible goods services - capital goods - sale of capital goods - reversal of credit not made under Rule 3(5A)(a) of Cenvat Credit Rules - extended period of limitation - HELD THAT - From Section 73 (3) of the Finance Act, 1994, it is very clear that the benefit of this provision will not be applicable when there is suppression , willful mis-statement, fraud, collusion etc. The appellant have relied upon various cases that suppression of facts etc. cannot be alleged in the cases amounts have been paid and show cause notice is issued subsequent to audit. Except mentioning in the show cause notice that there has been suppression of facts, no positive act committed by the appellant has been put forth by the revenue to allege suppression of facts in the impugned cases. The detection is subsequent to the audit and therefore going by the ratio of case laws cited by the appellant one cannot allege suppression of facts where show cause notice has been issued on the basis of audit objections - thus the provisions of section 73(3) of the Finance Act, 1994 are rightly attracted. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Non-reversal of Cenvat credit on sold capital goods by group companies.
2. Imposition and reduction of penalties by lower authorities.
3. Applicability of Section 73(3) of the Finance Act, 1994.
4. Bar on Show Cause Notice by limitation based on audit findings.

Analysis:

Issue 1:
The group companies did not reverse Cenvat credit on capital goods sold, leading to a demand confirmed by the original order. The penalty was initially reduced by the Commissioner (Appeals) but further appealed by both parties.

Issue 2:
The appellant argued eligibility for Section 73(3) benefit, citing payment before the show cause notice. Various legal references were made to support this claim. The department objected, stating the issue was not raised earlier. The appellant also claimed the show cause notice was time-barred based on audit precedents.

Issue 3:
The Tribunal analyzed Section 73(3) of the Finance Act, 1994, emphasizing its applicability in cases where tax is paid with interest before the notice. Legal precedents were cited to support this interpretation, highlighting the importance of timely tax payment.

Issue 4:
The department argued against the reduction of penalties under Cenvat Credit Rules and Section 78 of the Finance Act, 1994. The Commissioner (Appeals) was criticized for modifying penalties without proper justification, especially for subsequent years. The Tribunal found no suppression of facts post-audit, aligning with legal precedents supporting the appellant's position.

Conclusion:
The Tribunal allowed the appeals filed by the appellant, providing relief as per the law. The department's appeal was rejected, and cross objections by the appellant were disposed of accordingly. The judgment emphasized the importance of timely tax payment and the inapplicability of penalties without proper justification or evidence of suppression of facts.