2012 (12) TMI 314 - AT - Service Tax

Cenvat Credit on input services - non payment or delayed payment of service tax by the service provider - held that - Appellants are not expected to/required to know the actual date of payments of the service tax by the service provider and they have paid the bill amount (the service charges the service tax) to the service provider before November, 2006 itself and, therefore, there is nothing irregular in their taking the credit in November, 2006 - Service provider has defaulted/delayed in paying the service tax and the said service provider has not been included as a noticee in the present proceedings - appellant has made out a case for waiver of penalty imposed on them - waiver of penalty and stay of recovery thereof till the disposal of the appeal.

Summary

Issues:
1. CENVAT credit of service tax on input services taken by the appellant.
2. Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules, 2004.

Analysis:

Issue 1:
The appellant had taken CENVAT credit of service tax paid on input services during November 2006, where the service provider, a sister concern, paid the service tax in January 2007. The Commissioner dropped the demand of service tax but imposed a penalty under Rule 15(2) of the CENVAT Credit Rules, 2004. The appellant argued that they were not required to know the exact payment date of the service tax by the provider and had paid the bill amount before November 2006. The advocate cited Rule 4(7) of the CENVAT Credit Rules to support their position. The Tribunal noted that the service provider's delay in paying the service tax was not the appellant's fault and held that the appellant had a valid case for waiver of the penalty.

Issue 2:
Regarding the imposition of the penalty under Rule 15(2) of the CENVAT Credit Rules, the Tribunal observed that the Commissioner did not confirm the demand of service tax on the appellant. It was highlighted that the service provider, responsible for the delayed payment of service tax, was not part of the proceedings. Consequently, the Tribunal found that the appellant should not be penalized for the service provider's default. Thus, the Tribunal granted a waiver of the penalty and stayed its recovery until the appeal's disposal.

This judgment underscores the importance of considering the circumstances surrounding the availment of CENVAT credit and the responsibility of service providers in timely payment of service tax. It also emphasizes the need for fairness and proportionality in imposing penalties under the relevant rules.