2015 (1) TMI 84 - AT - Service Tax

CENVAT Credit - Belated revised returns filed - Imposition of interest and penalty - Held that - There is an irregular availment of credit by the appellant which is admitted fact on record reflecting conduct of the appellant as stated above. But the record nowhere exhibits that Cenvat credit irregularly taken was utilised. Accordingly, it can be only held that credit was availed for which levy of interest is justified and there shall be no interference to the levy of interest by the Tribunal. Interest demand is thus confirmed. Insofar as the penalty under Rule 15(1) of CCR, 2004 is concerned, learned adjudicating authority imposed penalty of ₹ 62,04,375/- without following the doctrine of proportionality. Rule 15 of CCR, 2004 does not necessarily require levy of penalty to the extent of Cenvat credit disputed. Penalty is mandate of law to discourage recurrence of default in future. But dose of penalty depends on the facts and circumstances of the case. Following doctrine of proportionality, it is considered appropriate to impose penalty of ₹ 25,000 to reduce the litigation - Decided partly in favour of assessee.

Summary

Issues: Irregular availment of credit, imposition of interest, penalty under Rule 15(1) of CCR, 2004

Irregular Availment of Credit:
The appellant filed a revised ST-3 Return to rectify a mistake made in the original return, reducing the capital goods credit from 100% to 50%. However, since the revised return was belatedly filed, the credit was considered irregularly taken under the law. An interest of Rs. 1,87,005/- was demanded for this irregularity. The Tribunal confirmed the interest demand, stating that the irregularly taken credit was not utilized, justifying the levy of interest.

Imposition of Penalty under Rule 15(1) of CCR, 2004:
The adjudicating authority imposed a penalty of Rs. 62,04,375/- on the appellant under Rule 15(1) of CCR, 2004 without considering the doctrine of proportionality. The Tribunal noted that while penalty is meant to discourage future defaults, it should be proportionate to the offense. Following the doctrine of proportionality, the Tribunal reduced the penalty to Rs. 25,000/- to align with the facts and circumstances of the case and to reduce litigation. The appeal was allowed partly, with the stay application being disposed of accordingly.

This judgment highlights the importance of adhering to procedural requirements in availing credits and the need for penalties to be proportionate to the offense committed. The Tribunal's decision to confirm the interest demand but reduce the penalty showcases a balanced approach to enforcing compliance while considering the specific circumstances of the case.