2013 (10) TMI 966 - AT - Service Tax

Wrong availment of interest paid on service tax as Cenvat Credit - Penalty under section 11AC OR Rule 15 - Revenue pointed out that assessee were not eligible for credit of interest amount paid - Revenue was of the view that the appellant should pay a penalty equal to the cenvat credit wrongly taken Held that - Penal provisions under Rule 15 (2) and Section 11AC are of different nature - If there is circumstance for imposing penalty under section 11AC only that section will apply - Otherwise, penalty should be imposed under Rule 15 (2) only - this is not a case of suppression, collusion or willful mistake with intention to evade payment of duty - thus section 11AC is not warranted - only penalty under Rule 15 (2) of Cenvat Credit Rules 2004 is warranted - the penalty reduced to be paid under Rule 15 (2) of the Cenvat Credit Rules, 2004 Decided partly in favour of Assessee.

Summary

Issues: Penalty imposition under Section 11AC vs. Rule 15(2) of Cenvat Credit Rules 2004

Detailed Analysis:

1. Issue of Penalty Imposition under Section 11AC:
The case involved a penalty imposition under Section 11AC due to the appellant wrongly availing Cenvat credit on interest paid, which the Revenue contended was not eligible. The appellant had initially not paid service tax on services received from sales agents abroad but rectified the error upon being notified by the department. The Revenue argued that the penalty under Section 11AC was justified, as the mistake was only discovered during an audit, and the appellant would have continued to benefit from the credit if not detected.

2. Arguments by Appellant's Advocate:
The appellant's advocate argued that the erroneous credit was a result of a genuine mistake in interpreting legal provisions, with no intent to evade tax payment. They emphasized that upon realizing the error, the appellant promptly reversed the incorrect credit, indicating no basis for imposing a penalty equal to the duty amount.

3. Arguments by Revenue's Advocate:
The Revenue's advocate countered that the mistake was only rectified due to an audit, implying that the appellant would have retained the benefit of the credit if not audited. Therefore, they supported the penalty imposition under Section 11AC as legally appropriate.

4. Judgment and Decision:
The presiding judge analyzed the circumstances and differentiated between penalties under Rule 15(2) and Section 11AC, noting that the latter applies only in cases of suppression, collusion, or willful intent to evade duty payment. Considering the lack of such elements in the case, the judge concluded that Section 11AC penalty was not warranted. Consequently, the penalty was reduced to Rs. 15,000 under Rule 15(2) of the Cenvat Credit Rules 2004. The appeal was partially allowed, and the stay petition was disposed of accordingly. The judgment highlighted the importance of intent and circumstances in determining the appropriate penalty provision to be applied in tax matters.