2013 (11) TMI 257 - AT - Service Tax

Wrong Utilization of Cenvat credit Service tax on outward transportation Held that - Utilization of wrongly availed credit for payment of Service tax, which was required to be paid in cash amounts to as if no service tax was ever paid, in which case the appellant should be imposed penalty - Cenvat credit is not available to the appellant - Inasmuch as the same stand utilized by them for payment of duty on the outward transportation - appellants would pay the Central excise duty in cash along with interest - On payment of such service tax in cash, the credit utilized by them for payment of such service tax would be credited in their Cenvat credit account and the entire credit availed by them on inward transportation of the raw material would be paid back to them by making a debit entry in their Cenvat credit account. Penalty - Availment of credit and its utilization was reflected by the appellant in their ST 3 return - If the appellant was having any malafide intention, they would not have correctly declared all the facts to their jurisdictional authorities, at the time of filing of their returns this is a case of interpretation of complex provisions of service tax, of which assessee may not be aware of - this is not a case of imposition of penalties Penalty set aside Decided partly in favour of Assessee.

Issues:
1. Appellant availed input service tax credit for transport services.
2. Revenue denied service tax credit on inward transportation.
3. Appellant utilized the credit for outward transportation.
4. Proceedings initiated for denial of credit, interest, and penalties.
5. Appeal against denial of credit and imposition of penalties.
6. Interpretation of provisions of law regarding service tax credit.
7. Appellant's readiness to pay service tax on outward transportation.
8. Dispute over imposition of penalties for the appellant's actions.

Analysis:
1. The appellant, engaged in manufacturing exempted products, availed input service tax credit for transport services used to bring raw materials to the factory premises. The appellant utilized this credit for the outward transportation of the final product, which required service tax payment.

2. The Revenue contended that since the final product was exempted, the appellant was not entitled to the service tax credit on inward transportation. Proceedings were initiated against the appellant for denial of credit, resulting in an order denying the credit, confirming service tax on outward transportation, and imposing penalties.

3. The appellant's representative acknowledged that they were not entitled to the credit on inward transportation. They agreed to pay the service tax on outward transportation in cash, with the already paid service tax through credit being credited back to the Cenvat account.

4. The appellant argued that their actions were based on an interpretation of the law, and there was no malicious intent. The Revenue argued that using wrongly availed credit for service tax payment should attract penalties.

5. After considering both sides' arguments, the judge held that the appellant was not entitled to the credit. The appellant was directed to pay the central excise duty in cash for the outward transportation and receive a debit entry for the credit availed on inward transportation.

6. Regarding penalties, the judge agreed with the appellant's representative that there was no malafide intention. The appellant had correctly declared all facts in their returns, indicating a lack of awareness rather than intentional wrongdoing. Therefore, the imposition of penalties was set aside.

7. The appeal was disposed of with the direction for the appellant to pay the central excise duty in cash for the outward transportation and receive the credit availed on inward transportation through a debit entry, while the penalties were set aside due to the lack of malicious intent.

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