2010 (1) TMI 362 - AT - Service Tax

Cenvat Credit- On scrutiny of the Service tax returns filed for the period October, 2005 to March, 2006, it appeared that to the lower authorities that the appellant had not discharged the Service tax liability within the time specified on which the Service tax is payable. It was also noticed by the authorities that the appellant had availed Service tax credit under Cenvat Credit Rules in respect of the Service tax paid on the various services like Banking & other Financial Services and Business Auxiliary Services, the appellants were directed to show cause as to why the interest was not demanded by them for the delay in payment of Service tax during the period October, 2005 to March, 2006 and why the Cenvat credit to an amount of Rs. 2,27,02,809/- be not disallowed as inadmissible credit. Held that- the appellants have not violated any provisions of the Cenvat Credit Rules and have been trying to substantiate their claim of eligibility to Cenvat Credit by producing the certificate of statutory auditors as regards the correctness of the Cenvat credit availed. In view of this, we set aside the penalty imposed on the appellant.

Summary

Issues:
- Interest liability for delayed payment of service tax
- Eligibility of Cenvat credit on service tax paid
- Imposition of penalty under Rule 15(3) of the Cenvat Credit Rules, 2004

Interest Liability for Delayed Payment of Service Tax:
The appeal challenged an Order-in-Original due to irregular discharge of service tax liability by a registered service provider offering banking and financial services. The appellant had not paid service tax within the specified time and availed Cenvat credit without producing necessary documents. The Adjudicating Authority concluded the appellant was liable for interest on delayed payments and disallowed Cenvat credit, imposing a penalty. The appellant contended that payments were made before the due date, evidenced by demand drafts and TR 6 Challans. The Tribunal upheld interest for March 2006 but found no delay in payments for October 2005 to February 2006, as demand drafts were dated prior to the due date.

Eligibility of Cenvat Credit on Service Tax Paid:
Regarding Cenvat credit eligibility, the appellant presented a certified auditor's report verifying payment of service tax. The Tribunal deemed the auditor's certificate as substantial evidence, remitting the matter back to the Adjudicating Authority for further consideration based on the new evidence. The Tribunal emphasized the importance of natural justice principles in reconsidering the Cenvat credit issue.

Imposition of Penalty under Rule 15(3) of the Cenvat Credit Rules, 2004:
The Adjudicating Authority had imposed a penalty under Rule 15(3) of the Cenvat Credit Rules, 2004, which the Tribunal found unwarranted. The Tribunal noted the appellant's efforts to support their Cenvat credit claim with the auditor's certificate and overturned the penalty. The appeal was disposed of accordingly, with the Tribunal setting aside the penalty and directing a reevaluation of the Cenvat credit issue by the Adjudicating Authority.

*(Operative portion of this order pronounced on conclusion of the hearing)*