2013 (12) TMI 260 - AT - Service Tax

Penalty u/s 76 - Goods Transport Agency service - Availment of CENVAT Credit - Commissioner set aside penalty - Held that - Respondent has established a reasonable cause for failure to pay the service tax during the period April, 2007 to March, 2008 through the GAR-7 Challan (although the said liability had already been discharged by debiting the Cenvat credit amount during the relevant period) and hence this is an appropriate case to invoke the provisions of Section 80 of the Finance Act - Following decision of CCE&C, Daman Vs. PSL Corrosion Control Services Ltd. (2010 (3) TMI 784 - GUJARAT HIGH COURT) - Decided against Revenue.

Summary

Issues:
- Appeal against penalty imposed under Section 76 of the Finance Act, 1994.
- Admissibility of CENVAT Credit in discharging service tax liability.
- Interpretation of provisions of CENVAT Credit Rules, 2004.
- Invocation of Section 80 of the Finance Act for penalty imposition.

Analysis:
1. The appeal was filed against the penalty imposed under Section 76 of the Finance Act, 1994. The Respondent, engaged in manufacturing LM Coke, availed the service of Goods Transport Agency (GTA) and utilized CENVAT Credit for payment of service tax. A show cause notice was issued for recovery of service tax short paid due to improper CENVAT Credit utilization. The Adjudicating Authority confirmed the demand and imposed a penalty, which the Respondent disputed before the Commissioner (Appeals).

2. The Revenue contended that the Respondent paid the service tax only after the adjudication process, indicating lack of voluntary payment intention. On the other hand, the Respondent argued a bona fide mistake in CENVAT Credit utilization, citing lack of awareness regarding amendments to the definition of 'output service' under CENVAT Credit Rules, 2004. The Respondent maintained that the service tax liability was properly determined and paid using CENVAT Credit, with no intention to evade payment.

3. The Tribunal referred to a previous case and highlighted that penalties under Sections 76 and 78 of the Finance Act should not be automatic. It was noted that sufficient cause for default in service tax payment could warrant invocation of Section 80 of the Act. Relying on this precedent, the Tribunal found that the Respondent had shown reasonable cause for failure to pay service tax through GAR-7 Challan, as the liability was discharged by debiting CENVAT Credit during the relevant period. Consequently, the Tribunal upheld the Commissioner (Appeals) order, dismissing the Revenue's appeal as lacking merit.

4. In conclusion, the Tribunal deemed it appropriate to invoke Section 80 of the Finance Act in this case, considering the Respondent's established reasonable cause for the payment default. The judgment emphasized the importance of assessing individual circumstances before imposing penalties under the relevant sections of the Finance Act, ultimately upholding the decision of the Commissioner (Appeals) and dismissing the Revenue's appeal.