2010 (6) TMI 228 - HC - Service Tax

Area Based exemption - Show Cause Notices were issued on the ground that self credit of Rs.20,19,827/- for the aforesaid period was irregular since Cenvat Credit to the said extent was not fully utilized for payment of excise duty in terms of the Notification. Cenvat credit erroneously used for payment of service tax. On realization of mistake, entire service tax paid by assessee from PLA. Held that duty paid even in terms of Notification No. 39/2001-C.E. and not defaulted. Thus no prejudice caused to revenue, and they could not seek payment of impugned amount by treating it as excess refund.

Summary

Issues:
1. Granting of refund without complying with conditions of Notification No. 39/2001-CE.
2. Treatment of show cause notice as barred under Section 11A of Central Excise Act, 1944.

Analysis:
1. The case involved an appellant revenue challenging a Customs, Excise And Service Tax Appellate Tribunal order. The respondent, a manufacturer, availed benefits under Notification No. 39/2001-CE. The notification allowed refund of excise duty paid in cash after utilizing Cenvat Credit. The respondent opted for self-credit procedure, required to forward details to the Jurisdictional Assistant Commissioner. The excess credit had to be reversed promptly. The self-credit could be used for subsequent duty payments.

2. The respondent utilized Cenvat Credit for service tax payments, later rectified the error, and deposited the due amount. Show Cause Notices were issued for irregular self-credit utilization. The Tribunal found demands for certain periods beyond the limitation period. The appellant argued that Cenvat Credit misuse for service tax was unlawful, requiring repayment based on the self-credit.

3. The Tribunal noted the respondent's total credit and payment details, confirming no default in central excise duty payments. The Tribunal found no diversion of excise duty towards service tax, with a significant balance in the Cenvat Credit account. The order emphasized that no prejudice was caused to the revenue. The decision was based on factual evidence, leading to dismissal of the appeal due to the absence of legal flaws and no impact on revenue.

4. The judgment concluded that the Tribunal's order, supported by facts and evidence, did not require intervention due to the lack of legal defects. As there was no substantial legal question and no adverse impact on revenue, the appeal was dismissed. A related Civil Application was rejected based on the Appeal's outcome, rendering it inconsequential.