2014 (11) TMI 333 - AT - Service Tax

Waiver of penalty - Whether for the short payments of Service Tax, the assessee needs to be penalized under section 76 of the Act and whether Cenvat credit to be denied to them along with imposition of penalty under section 76 and Rule 15(3) of CC Rules for the same - Held that - no malafides could be attributed to the assessee as the amounts were duly reflected in their ST-3 return and also as the amounts of short payment are rather on the lower side which have been paid voluntarily. - penalty waived extending the provisions of section 80 - Decided in favor of assessee. Denial of the credit is on account of infirmities in the input invoices. I note that this is not the case of the Department that the input services have not been availed or payments not made for the same. In the circumstances, I find force in the plea made by Shri Rahul Aggarwal, CA for consideration of waiver of penalty and accordingly give benefit of section 80 of the Act and hold that no penalty under section 78 is imposable upon the assessee. I also note that this is not a case of short payment of Service Tax and therefore penalty under Section 76 of the Finance Act 1994 is not at all warranted. As regards imposition of other penalty is concerned, I hold some imposition is necessary as the invoices on which the Cenvat credit was availed have been found to have deficiencies which of course, which have been later rectified. Accordingly imposition of penalty ₹ 2000/- under Rule 15(3) of Cenvat credit Rules 2004 is justified and no interference is made. Penalties imposed under section 76 and section 78 of the Finance Act 1994 are not sustainable as per grant of benefit of section 80 of the Act. However token penalty of ₹ 2,000/- is held to be liable - Decided partly in favour of assessee.

Summary

Issues:
1. Short payment of Service Tax
2. Denial of Cenvat Credit based on allegedly invalid invoices
3. Imposition of penalties under section 76 and Rule 15(3) of CC Rules

Short payment of Service Tax:
The appellants appealed against an order confirming short paid Service Tax of &8377; 22,675/- and disallowing a Cenvat credit of &8377; 60,005/-, with penalties imposed. Two short payments were identified, one for &8377; 22,675/- and another for &8377; 18,346/-. The first short payment was confirmed as unexplained, while the second was paid before the Show Cause Notice issuance. The appellants did not contest the short payments but challenged the penalty under section 76 of the Finance Act, 1994. The counsel argued that the short detections were unintentional, requesting penalty condonation under section 80 due to lack of mens rea.

Denial of Cenvat Credit based on Invalid Invoices:
The issue of denial of Cenvat Credit amounting to &8377; 60,005/- was raised due to allegedly invalid invoices. The Commissioner (Appeals) allowed credit for &8377; 22,365/- but disallowed &8377; 60,005/- citing missing STC numbers on service provider invoices. The appellants argued that they rectified the issue and requested the denied credit to be allowed, emphasizing they received the services and made payments. They sought penalty condonation under section 80, claiming no malafides. The Department contended that proper invoices were not submitted, leading to the denial of Cenvat Credit and imposition of penalties under section 76 and Rule 15(3) of CC Rules.

Judgment:
After reviewing the submissions and records, the judge deliberated on penalizing the appellants for short payments and denial of Cenvat Credit. The judge acknowledged the short payments but refrained from imposing penalties under section 76, considering the amounts were minor and voluntarily paid. However, the denial of Cenvat Credit was upheld due to deficiencies in the invoices, making the amount recoverable with interest. The judge waived penalties under section 76 and 78, granting the benefit of section 80. A token penalty of &8377; 2,000/- under Rule 15(3) of CC Rules was deemed justified. The judgment confirmed the recovery of short payments and inadmissible Cenvat Credit, along with interest, while sustaining the token penalty.

This detailed analysis of the judgment highlights the issues of short payment of Service Tax, denial of Cenvat Credit based on invalid invoices, and the imposition of penalties under relevant sections. The judge's considerations, arguments presented by both parties, and the final decision are thoroughly examined, providing a comprehensive overview of the legal judgment.