2010 (5) TMI 318 - AT - Service Tax

Cenvat Credit - Recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. Held that- cenvat credit wrongly utilised was reversed before issuance of SCN. Thus penalty was not justified.

Summary

Issues: Waiver of pre-deposit of penalty for wrong availment of Cenvat credit, applicability of section 73(3) of the Finance Act, 1994, interpretation of relevant statutory provisions.

In the judgment by the Appellate Tribunal CESTAT, CHENNAI, the issue of waiving pre-deposit of penalty of Rs. 30 lakhs imposed on the assessees for wrong availment of Cenvat credit during April 2007 to March 2008 was addressed. The Tribunal, led by Ms. Jyoti Balasundaram, Vice-President, decided to proceed with hearing the appeal without the pre-deposit, given the reversal of the service tax amount utilized by the assessees before the issuance of the showcause notice in July 2008. The Tribunal relied on section 73(3) of the Finance Act, 1994, which states that if service tax has not been levied or paid, the person chargeable with the tax may pay the amount based on their own ascertainment or as determined by a Central Excise Officer before the notice is served. In this case, since the service tax amount was reversed prior to the notice, the Tribunal held that the assessees were not liable to any penal action.

Furthermore, the Tribunal's decision was supported by previous rulings, including the Tribunal's order in Santi Casting Works v. CCE and CCE v. Sagar Enterprises, which interpreted the statutory provisions similarly. By following the ratio of these decisions, the Tribunal set aside the penalty imposed on the assessees and allowed the appeal. The judgment underscores the importance of compliance with tax regulations and the significance of timely actions in avoiding penal consequences.