2014 (7) TMI 745 - AT - Service Tax

Imposition of penalty - Credit utilized before making payment to vendors - Validity of Commissioner s order - Held that - Commissioner s order does not have one column which is very important and which has been the cause of the wrong conclusion by the Commissioner. This is the opening balance in respect of each month. Because of not taking opening balance into account, the CENVAT credit available at the end of each month for utilization has become incorrect and as a result in that particular month which is examined by the Commissioner, there is excess utilization of credit vis-a-vis availability. There was no excess utilization at all during the relevant period. Under these circumstances what has happened is only an accounting error by the appellant and that mistake has been rectified by them by paying the entire amount with interest and correcting their account suitably. Such being the position, since the entire amount has been paid before issue of show-cause notice and initiation of proceedings, the appellant need not be visited with penalty also. - penalty can be waived by invoking provisions of Section 80 of Finance Act 1994 also. - Decided in favour of assessee.

Summary

Issues:
1. Availment of CENVAT credit more than once for the same invoice.
2. Availment of CENVAT credit before making payment to vendors.

Issue 1: Availment of CENVAT credit more than once for the same invoice:
The appellant, engaged in providing various services, claimed unutilized CENVAT credit as a refund. Revenue found that credit was taken more than once for the same invoice. However, the appellant had already deposited the entire wrongly availed credit with interest before proceedings began. The appeal solely contested the penalty imposition. The tribunal, after considering the details, decided to proceed with the appeal without predeposit, as it involved only penalty and did not require further verification.

Issue 2: Availment of CENVAT credit before making payment to vendors:
The second issue involved the appellant availing credit before making payments to vendors, based on their accounting practice. The appellant rectified the error by paying the amount with interest upon realization. The Commissioner's order was challenged as it did not consider the opening balance in the CENVAT credit account, leading to an incorrect conclusion of excess utilization. The appellant's submission that there was no intentional evasion and the mistake was rectified promptly was accepted. The tribunal found it to be an accounting error, rectified by the appellant before any show-cause notice was issued. Consequently, the penalty was waived under Section 80 of the Finance Act 1994.

In conclusion, the tribunal allowed the appeal by waiving the penalty imposed on the appellant, considering the inadvertent accounting error that was rectified promptly. The judgment emphasized the importance of considering opening balances in CENVAT credit accounts and highlighted the appellant's proactive approach in correcting the mistake.