2023 (7) TMI 663 - AT - Service Tax

Reversal of CENVAT Credit - buying SIM cards at a discounted price and then selling the SIM cards to a lesser discounted price in the retail market thereby earning a profit through difference of discounts - Revenue alleged that the appellant was selling the SIM cards without any further processing and therefore as per Rule 3(5) of the Cenvat Credit Rules, 2004, they were liable to reverse the equal amount of credit availed on the inputs. HELD THAT - The appellant has been filing Service Tax returns regularly and paying service tax. The details of credit availed and utilized by them have been disclosed in the ST-3 returns filed by them. The value of taxable services rendered by them have been disclosed in their Balance Sheets. The two issues have been raised by the department during the course of audit, from the data disclosed by the Appellant. Thus, it is observed that the appellant has not suppressed any information from the department. All the details have been taken from their audited balance sheet. In such cases suppression of fact with an intention to evade payment of duty cannot be alleged. In the present case also, the details have been taken by the Audit party from the audited balance sheet. The department has not established any suppression on the part of the Appellant. The impugned order is also silent on this - the provisions of section 78 are not applicable in this case. Accordingly, penalty imposed under 78 is liable to be set aside. Appeal allowed.

Summary

Issues:
The issues involved in this case include irregular availment of Cenvat credit, short payment of Service Tax, and the applicability of penalty under section 78 of the Finance Act, 1994.

Irregular Availment of Cenvat Credit and Short Payment of Service Tax:
The appellant was providing 'business auxiliary service' by distributing SIM cards to a telecom company. The department alleged that the appellant was selling SIM cards without further processing, leading to the proposal of recovering irregular Cenvat Credit and short paid Service Tax. The audit party detected these irregularities during an audit, and the appellant agreed with the audit objection. The appellant paid the irregular Cenvat Credit and the short paid Service Tax before the issuance of the show cause notice. They argued that as per section 73(3) of the Finance Act, 1994, no show cause notice was required when the duty was paid before issuance of the notice. The appellant contended that they did not suppress any information and cited a previous Tribunal order where a similar penalty was waived under similar circumstances.

Applicability of Penalty under Section 78:
The appellant had been regularly filing Service Tax returns and paying taxes, with all details disclosed in their returns and balance sheets. The department raised issues during an audit, but the appellant had not suppressed any information. The Tribunal observed that suppression of facts with an intention to evade payment could not be alleged as all details were taken from the audited balance sheet. Citing a previous Tribunal decision, the Tribunal held that the penalty under section 78 was not applicable in this case. The appellant's appeal was allowed, and the penalty imposed under section 78 was set aside.

The Tribunal found that the appellant had not suppressed any information and had paid the irregular Cenvat Credit and short paid Service Tax before the show cause notice. Citing relevant legal provisions and a previous Tribunal decision, the Tribunal held that the penalty under section 78 of the Finance Act, 1994 was not applicable in this case. As a result, the appeal filed by the appellant was allowed, and the penalty was set aside.