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2016 (8) TMI 895 - AT - Service TaxImposition of penalty - Rule 15(2) of CENVAT Credit Rules 2004 - manufacture of pistons, pistons rings etc., - receive management consultancy services - payment of management fee and sole selling commission CENVAT credit on input services delay in deposit of service tax by service provider Held that - the appellant who has paid the service tax to the service provider is entitled to avail the credit of the same without finding whether such service tax paid by him to the service provider stands further deposited by him to the exchequer. It is neither possible nor practical for any service recipient to verify the fact of payment of service tax by the service provider. Remedy of the Revenue lies at the hands of the service provider and not at the hands of the service recipient. Further, the provisions of Rule 15(2) cannot be invoked as the issue was of credit on input services as held in the case Davangere Sugar Company Vs CCE Bangalore II 2011 (2) TMI 553 - CESTAT, BANGALORE no penalty imposed decided in favor of appellant.
Issues:
1. Irregular availment of CENVAT Credit by the appellant. 2. Imposition of penalty under Rule 15(2) of CENVAT Credit Rules 2004. 3. Liability of the appellant for delayed payment of service tax by the service provider. Analysis: Issue 1: Irregular availment of CENVAT Credit by the appellant The appeal was against an order imposing a penalty on the appellant for irregularly availing CENVAT Credit under CENVAT Credit Rules 2004. The appellant, a Public Limited Company, availed CENVAT Credit for management consultancy services from a specific provider. The Accountant General Audit Party observed this during an audit and issued a show-cause notice for recovery of the credit irregularly availed. The appellant contended that they were entitled to the credit as per the rules and should not be held liable for any delay in the service provider's payment of service tax. The main issue was whether the credit availed by the appellant was irregular due to the service provider's delayed payment of service tax. Issue 2: Imposition of penalty under Rule 15(2) of CENVAT Credit Rules 2004 The learned Commissioner had imposed a penalty under Rule 15(2) of the CENVAT Credit Rules on the appellant. The appellant challenged this penalty, arguing that it was not legal for irregular availment of CENVAT Credit on input services. Citing a relevant case law, the appellant contended that Rule 15(2) could not be invoked for credit on input services. The appellant's position was supported by various judgments, indicating that the penalty imposed was not justified under the law. Issue 3: Liability of the appellant for delayed payment of service tax by the service provider The appellant argued that they should not be penalized for any delay in the service provider's payment of service tax. They maintained that the responsibility for recovering interest for delayed payment lay with the service provider, not the appellant. The appellant cited case laws to support their position that the service recipient could avail credit without verifying the service provider's payment of service tax. The Tribunal agreed with the appellant's arguments, stating that the Revenue's remedy lay with the service provider, and the penalty imposed on the appellant was not legal. In conclusion, the Tribunal found the impugned order unsustainable in law and set it aside, allowing the appeal with consequential relief if any. The judgment emphasized that the appellant, as a service recipient, was entitled to avail the credit without being penalized for the service provider's delayed payment of service tax.
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