2024 (11) TMI 263 - AT - Service Tax

Cenvat credit denied only on the ground of non-filing of ST-3 - appellant have not taken the cenvat credit on capital goods, therefore, the same is not hit by invocation of Rule 4(4) of Cenvat Credit Rules, 2004 - HELD THAT - We find that as regard the allegation that the appellant have taken the cenvat on capital goods as well as availed the depreciation. From the perusal of record it is absolutely clear that the appellant have not taken cenvat credit on capital goods, therefore, the reason for denial of credit on the goods is not correct. On this basis the credit cannot be denied. As regard the denial credit on the input service only on the ground of non filing of ST-3 return, we are of the view that merely of non-filing of ST-3 return, the assessee cannot be deprived of their statutory benefit of cenvat credit as provided under statute. The cenvat credit cannot be denied only on the ground of non-filing of ST-3, therefore on both the counts, the cenvat credit was wrongly disallowed which is not sustainable, therefore, we hold that the appellant is eligible for cenvat credit and the same stands adjusted against the service tax demand as accepted by the appellant. Demand as raised under advertising service in the show cause notice whereas the adjudicating authority itself has confirmed the demand under the category of selling of space for advertisement - This demand pertaining to the period prior to 01.07.2012 where the category of service was significantly statutory, therefore, if the demand was proposed under the wrong head, the demand will not sustain under different head as held in catena of judgments as cited by the appellant, therefore, the demand is set aside only on this ground itself without going into the issue of limitation as raised by the appellant. Penalty for failure to pay service tax for reasons of fraud, etc . - As in the facts of the present case, appellant is liable to pay penalty of 15% of the recoverable service tax amount. We find that the appellant have paid the service tax as admitted by them, the tax amount which includes the cenvat credit which is admissible to them as discussed above and the remaining amount was paid in cash along with interest and penalty of 15%. Therefore, no further penalty is required to be sustained. Accordingly, we set aside the penalty over and above Rs. 4,78,239/-.

Summary

Issues Involved:

1. Whether the demand of Rs. 4,12,476/- is time-barred and whether it is sustainable given the incorrect classification of service in the show cause notice.
2. Whether the appellant is eligible for Cenvat credit amounting to Rs. 15,80,877/-.
3. Whether the penalty should be restricted to 15% of the total amount.

Detailed Analysis:

1. Time-Barred Demand and Incorrect Classification:

The first issue pertains to the demand of Rs. 4,12,476/-. The appellant argued that the demand is time-barred as it relates to the extended period from 01.04.2012 to 30.06.2012, with the show cause notice issued on 17.05.2017. Furthermore, the demand was initially classified under "advertising agency" services in the show cause notice but was confirmed under "selling of space for advertisement." The tribunal found that the demand was indeed raised under the wrong category in the show cause notice, and as per established legal precedents, a demand cannot be sustained if confirmed under a different category than proposed. Therefore, the demand of Rs. 4,12,476/- was set aside on this ground alone, without addressing the issue of limitation.

2. Eligibility for Cenvat Credit:

Regarding the eligibility for Cenvat credit of Rs. 15,80,877/-, the appellant contended that they did not avail Cenvat credit on capital goods, thus Rule 4(4) of the Cenvat Credit Rules, 2004, was not applicable. The tribunal agreed, stating that the appellant had not taken Cenvat credit on capital goods, and the denial of credit on this basis was incorrect. Additionally, the tribunal addressed the non-filing of ST-3 returns, concluding that procedural lapses like non-filing should not deprive the appellant of their statutory rights to Cenvat credit. The tribunal cited multiple judgments supporting the view that substantial rights cannot be denied due to procedural infractions. Consequently, the appellant was deemed eligible for the Cenvat credit of Rs. 15,80,877/-.

3. Penalty Restriction:

On the issue of penalty, the appellant sought restriction to 15% of the total amount, arguing that they had already paid the service tax along with interest and a 15% penalty. The tribunal examined Section 78(1) of the Finance Act, which provides for a reduced penalty of 15% if the service tax and interest are paid within 30 days of the notice or order. Given that the appellant complied with these conditions, the tribunal upheld the penalty of 15% amounting to Rs. 4,78,239/- and set aside any additional penalty.

Conclusion:

- The appellant is eligible for Cenvat credit of Rs. 15,80,877/-.
- The demand of Rs. 4,12,476/- is set aside due to incorrect classification.
- Penalty over and above Rs. 4,78,239/- is set aside.
- The appeals are partly allowed as per these terms.