2009 (3) TMI 430 - AT - Service Tax

Penalty- Assessee paid service tax liability initially through service tax credit subsequently, on being pointed out by revenue that credit could be utilized only for output services, assessee paid service tax in cash, since it was not providing output services. Equal amount of penalty was imposed and interest was also demanded from assessee. Commissioner (Appeals) held that payment through Cenvat Credit was also a normal and accepted mode of payment of duty and, therefore, it could not be said that there was a delay on part of assessee and that no benefit had been derived by the assessee. Accordingly, he set aside demand for interest and penalty. Held that uphold the order of Commissioner (Appeals)

Summary

Issues:
1. Utilization of service tax credit for payment.
2. Imposition of penalty and interest.
3. Applicability of Circular No. 97/8/2007.
4. Comparison with the decision in Alstom Projects India Ltd. case.

Utilization of service tax credit for payment:
The respondents paid their service tax liability using service tax credit, but later paid the amount through challans as they were not providing GTA services. The Commissioner (Appeals) held that using Cenvat credit for payment is a normal mode and set aside the demand for interest and penalty. The revenue appealed this decision.

Imposition of penalty and interest:
The revenue argued that the Tribunal's decision goes against CBEC Circular No. 97/8/2007 and cited a different case. However, the Technical Member noted that the cited case is not comparable as the party in that case paid the amount in cash only after being pointed out. In the present case, the appellants promptly paid the service tax in cash upon realizing the omission. The Technical Member upheld the Commissioner (Appeals) decision and rejected the appeal.

Applicability of Circular No. 97/8/2007:
The revenue contended that the Tribunal's decision contradicts the instruction in Circular No. 97/8/2007. However, the Technical Member found that the circumstances in the present case, where the appellants rectified the error promptly by paying in cash, distinguish it from the case cited by the revenue. Therefore, the Technical Member upheld the decision of the Commissioner (Appeals).

Comparison with the decision in Alstom Projects India Ltd. case:
The revenue cited the decision in the Alstom Projects India Ltd. case to support their argument. Nevertheless, the Technical Member found that this case was not directly relevant to the matter at hand, as the crucial distinction was the immediate cash payment made by the appellants upon realizing the error. Consequently, the Technical Member rejected the revenue's appeal and upheld the decision of the Commissioner (Appeals).