2024 (10) TMI 455 - AT - Service Tax

Levy of penalty u/r 15 of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 apart from appropriating the service tax and interest paid - irregularly availing and utilizing the CENVAT credit - suppression of facts or not - invocation of Extended period of Limitation. HELD THAT - The Appellants have taken and utilized the CENVAT credit to the tune of Rs.63,58,370/- in the months of April 2007 and November 2007 respectively prior to the payment of the service tax on the import of services availed by them on reverse charge basis. There was a delay of 3 days in respect of payment of service tax after taking credit in the month of April and 7 days in the month of November 2007. The dates of availing the CENVAT credit were 30.04.2007 and 30.11.2007 whereas the dates of actual payment of service tax on reverse charge basis were 03.05.2007 and 06.12.2007 respectively. It is noticed that on being pointed out, the Appellant have paid the applicable interest. So, we do not find any justification for imposing mandatory penalty for such a clerical mistake committed in availing the CENVAT credit before the payment of the service tax. It is not that the Appellant has taken the credit without payment of the service tax. Extended period of Limitation - HELD THAT - The grounds indicated in the impugned order would not indicate any mala fide intention on the part of the appellant to evade tax. Ingredients of suppression are not found and as such, we are of the opinion that invoking extended period is not justified. The facts in the case of M B ENGINEERING LIMITED VERSUS C.C.E. -AHMEDABAD-II 2024 (7) TMI 313 - CESTAT AHMEDABAD are similar to the facts obtaining in the present appeal. In the above case, the Tribunal Ahmedabad has held that when the duty and interest are paid by the party during the course of the Audit, the assessee could not be further faulted with for its conduct to penalise them. Payment of duty with interest remove the stains of delay from the conduct of the party and bring back sparkles of bona fide conduct. In this appeal, even there is no allegation that the Appellant has taken the CENVAT credit without payment of the service tax on reverse charge basis. There was only few days delay and the assessee has availed the service tax paid on reverse charge basis even before its payment. There is no allegation of fraud or suppression and the Appellant have paid the interest for prior utilisation of the CENVAT credit and interest was paid before the issuance of the Show Cause Notice on being pointed by the Audit. The mandatory penalty imposed invoking the extended period under Rule 15(4) of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 is not justified and so ordered to be set aside. However, the appropriation of the tax and interest paid not disturbed. Appeal allowed.

Summary

Issues:
Imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 for irregular availing and utilization of CENVAT credit.

Detailed Analysis:

1. Background: The appeal was filed against the penalty imposed by the Commissioner of Central Tax for irregular availing of CENVAT credit by M/s. Hyundai Engineering India Pvt. Ltd. The Appellants availed credit before the actual payment of service tax, leading to delays in payment in April 2007 and November 2007.

2. Contentions of the Appellant: The Appellant argued that the delays were due to clerical errors, not intentional evasion. They paid interest promptly upon audit objection and maintained proper records. The Appellant cited precedents to support their case.

3. Lower Adjudicating Authority's Findings: The Lower Authority concluded that the Appellant intentionally availed CENVAT credit before payment, without notifying the Department. The Authority highlighted the self-assessment scheme obligations and larger period of limitation.

4. Respondent's Submission: The Authorized Representative supported the Lower Authority's findings, emphasizing that the irregularity was discovered during an audit, and interest was paid only after the audit objection.

5. Judicial Review: The Tribunal considered both parties' arguments and the evidence on record to decide whether the penalty imposed was justified.

6. Key Issue: The central issue was whether the mandatory penalty under Rule 15(4) of CENVAT Credit Rules, 2004, read with Section 78 of the Finance Act, 1994, for irregular availing and utilization of CENVAT credit, was warranted.

7. Tribunal's Decision: The Tribunal noted that the delays were minimal, and the Appellant rectified the errors promptly upon audit objection by paying interest. The Tribunal found no fraudulent intent or suppression to evade tax. Citing relevant legal provisions and precedents, the Tribunal concluded that the penalty imposed was not justified.

8. Precedents Considered: The Tribunal referenced cases where payment of duty and interest during an audit absolved the party from further penalties. The Tribunal emphasized that in the absence of fraud or suppression, penalties under Section 78 were not warranted.

9. Final Decision: The Tribunal allowed the appeal, setting aside the penalty imposed under Rule 15(4) of CENVAT Credit Rules, 2004, read with Section 78 of the Finance Act, 1994. However, the Tribunal maintained the appropriation of tax and interest paid.

10. Conclusion: The Tribunal's decision highlighted the importance of prompt rectification of errors and payment of interest in cases of delayed tax payments. The judgment emphasized the absence of fraudulent intent in the Appellant's actions, leading to the setting aside of the penalty while upholding the tax and interest payments.