2010 (2) TMI 450 - AT - Service Tax

Cenvat Credit - Confiscation and Penalty - Assessee wrongly took Cenvat Credit of service tax on Clearing and Forwarding Agent s Services. Revenue imposed penalty u/s 76 and 77 without having any ground of suppression. Held that - since impugned order did not concern about default in payment of service tax or any other provisions or any other infraction under 1994 Act penalties u/s 76 and 77 were not to be imposed.

Summary

Issues:
1. Demand of wrongly availed Cenvat credit along with penalties.
2. Validity of penalty imposed under Cenvat Credit Rules.
3. Applicability of penalty under sections 76 and 77 of Finance Act.

Analysis:
1. The appellant filed an appeal seeking to vacate the order demanding wrongly availed Cenvat credit of Rs. 1,09,366 along with penalties. The appellant had paid service tax under C&F Agent category for services rendered during specific financial years. Subsequently, the appellant took Cenvat credit of the service tax paid, believing they were not liable to pay the tax again. The original authority demanded the Cenvat credit under rule 14 of Cenvat Credit Rules, 2004 along with penalties. The appellant argued that there was no evidence of fraud or intention to evade tax. The appellant had already paid the wrongly availed Cenvat credit along with interest.

2. The appellant contended that the penalty under rule 15(4) of Cenvat Credit Rules could only be imposed if there was fraud, collusion, wilful misstatement, or contravention of provisions with the intention to evade tax. The appellant argued that since there was no such finding, the penalty should be set aside. The Tribunal found that the penalty could only be imposed under specific circumstances as per the rule, and since there was no evidence of fraud, collusion, or wilful misstatement, the penalty was not validly imposed. Therefore, the penalty under rule 15(4) was vacated.

3. The revenue argued that the appellant was liable for a penalty as they wrongly took back the tax paid as Cenvat credit. The Tribunal observed that the penalty under sections 76 and 77 of the Finance Act was not applicable in this case as it related to defaults in payment of service tax, which was not the issue at hand. Since there was no default in payment of service tax or any other infraction under the Act, the penalty under sections 76 and 77 was also not validly imposed. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.