2020 (4) TMI 697 - AT - Service Tax

Imposition of penalty u/r 15 of the CCR, 2004 read with Section 78 of the FA, 1994 - Irregular availment of Cenvat Credit - demand u/s 73 (2) of the Finance Act 1994 along with interest already paid before issuance of SCN - Suppression of facts or not - HELD THAT - There are no ingredient of miss-statement or suppression of facts with an intent to evade payment of tax. In fact after being pointed out by the CERA Audit, the appellant went through its records and finally did not dispute and paid the entire amount of tax along with applicable interest before issuance of the Show Cause Notice. The penalty imposed under Rule 15 of the CCR, 2004 read with Section 78 of the Finance Act, 1994 is set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged irregular availment of Cenvat Credit, demand confirmation under Section 73(2) of the Finance Act 1994, interest demand under Section 75, penalty imposition under Rule 15 of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994.

In this case, a Show Cause Notice was issued to the appellant alleging irregular availment of Cenvat Credit. The Adjudicating Authority confirmed a demand of ?1,97,269 under Section 73(2) of the Finance Act 1994 and also appropriated the amount already paid by the appellant. Additionally, interest under Section 75 amounting to ?43,335 was confirmed and appropriated as it was already paid. A penalty of ?1,97,269 was imposed under Rule 15 of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994. The Lower Appellate Authority rejected the appeal, leading to the present appeal before the Tribunal.

Upon hearing both sides and examining the records, it was noted that the appellant is involved in providing taxable services, including some exempted services like handling of agricultural produce. The appellant contended that the availed Cenvat Credit on input services used for providing exempted output service was an inadvertent mistake, rectified promptly upon identification by the CERA Audit. The entire disputed amount along with interest was paid before the Show Cause Notice was issued, indicating no deliberate intent to evade tax. The Tribunal found no evidence of misstatement or suppression of facts with an intent to evade tax. The appellant acknowledged the error upon audit identification, paid the entire tax amount with interest before the Show Cause Notice, demonstrating cooperation and compliance.

Consequently, the Tribunal set aside the penalty imposed under Rule 15 of the CCR, 2004 read with Section 78 of the Finance Act, 1994. The appellant's appeal was allowed with consequential benefits as per the law. This decision highlights the importance of rectifying inadvertent errors promptly upon identification, cooperation with authorities, and timely payment of dues to mitigate penalties in tax matters.