2016 (11) TMI 279 - AT - Service Tax

Demand of duty along with interest and penalty - payment of duty utilising the balance of CENVAT credit - whether the Service Tax due on 5.11.2008 paid through Cenvat Credit which was earned during 30.11.2008 to 31.1.2009 is permissible in terms of Rule 3(4) of Cenvat Credit Rules, 2004? - the appellant paid the amount through Cenvat Credit on 30.11.2008, 31.12.2008 and 31.01.2009 whereas this amount was due on 5.11.2008 - Held that - the fact is not under dispute that the service tax due in the month of November 2008 was discharged through Cenvat Credit earned during the period 30.11.2008 to 31.1.2009. Rule 3(4) of Cenvat Credit Rules, 2002 - From the proviso of above Rule, it can be seen that the service tax liability of a particular month if to be discharged from Cenvat account it can be paid only Cenvat credit availed and lying in balance on the last day of the month for which the service tax is due. In the present case the service tax of ₹ 12,57,365/- is due for the month of November 2008 whereas the same was paid from the Cenvat Credit earned from 30.11.2008 to 31.1.2009, which is not permitted as per the clear language of the proviso to Rule 3(4) of the Cenvat Credit Rules,2004 - the appellant was required to pay the dues of ₹ 12,57,365/- from cash and not from Cenvat account, however, since the appellant have discharged the service tax from the Cenvat account, I hold that the appellant shall deposit ₹ 12,57,365/- in cash and the same amount shall stand restored in their Cenvat account. In view of the facts and circumstances of the case, the appellant have undisputedly paid the service tax but from Cenvat account instead of cash there is no intention of evasion of tax. In any case, the Cenvat credit was available in the subsequent period and to that extent the cash payment of service tax, if any, shall stand reduced to this extent. The reliance placed by the appellant on the decision of Metal Temple Pvt. Ltd. Vs. Commissioner of Central Excise, Kolhapur 2015 (6) TMI 468 - CESTAT MUMBAI not applicable as the judgment is on the issue of Rule 8(3A) of Central Excise Rules, 2002 and on the issue that whether the Cenvat Credit during the default period can be utilized for payment of duty on the current clearances. In the present case, the issue is not related to the current liability but it is related to the dues of the previous period and as per Rule 3(4) of Cenvat Credit Rules, 2004, the service tax of the previous period of November 2008 can be paid from the Cenvat credit balance available as of 30.11.2008 only. Therefore, the fact of the judgment relied upon and the facts of the present case are different. The appellants have shown reasonable cause for waiver of penalties under Section 80 of the Finance Act. I, therefore waive the penalties imposed under Section 76 & 77 of the Finance Act. Appeal disposed off - decided partly in favor of appellant.

Issues:
1. Service tax payment through Cenvat Credit for a previous period.
2. Interpretation of Rule 3(4) of Cenvat Credit Rules, 2004.
3. Applicability of precedents cited by the appellant.
4. Liability for penalty under Sections 76 and 77 of the Finance Act.

Issue 1: Service tax payment through Cenvat Credit for a previous period

The appellant's appeal was against the rejection of their appeal by the Commissioner of Service Tax, upholding the Order-in-Original confirming a demand of Rs. 12,57,365, interest under Section 75, and penalties under Sections 76 and 77. The main contention was that the appellant paid the due amount through Cenvat Credit on later dates than when the amount was actually due, which was deemed impermissible under Rule 3(4) of the Cenvat Credit Rules, 2004.

Issue 2: Interpretation of Rule 3(4) of Cenvat Credit Rules, 2004

The Tribunal analyzed Rule 3(4) of the Cenvat Credit Rules, 2004, emphasizing that the proviso clearly states that the Cenvat Credit can only be utilized for payment of duty or tax relating to the month for which the credit is available on the last day of that month. In this case, the service tax due for November 2008 was paid from Cenvat Credit earned between November 2008 and January 2009, which was not in accordance with the rule.

Issue 3: Applicability of precedents cited by the appellant

The appellant relied on various judgments to support their argument that the payment of service tax dues from Cenvat Credit for a previous period should not be objected to if interest is also paid for the delayed period. However, the Tribunal differentiated the facts of those cases from the present one, highlighting that the issue here was not related to current liability but to dues of a previous period, making the cited judgments inapplicable.

Issue 4: Liability for penalty under Sections 76 and 77 of the Finance Act

Despite finding that the appellant had paid the service tax from Cenvat Credit instead of cash, the Tribunal acknowledged that there was no intention of tax evasion. Considering the availability of Cenvat credit in the subsequent period, the Tribunal reduced the cash payment liability and waived the penalties under Sections 76 and 77 of the Finance Act, citing reasonable cause for the appellant's actions.

In conclusion, the appeal was partly allowed, with the appellant required to deposit the due amount in cash while the same amount would be restored in their Cenvat account. The Tribunal recognized the appellant's payment of service tax and the absence of tax evasion intent, leading to the waiver of penalties under the Finance Act.

*(Pronounced in court on 29/02/2016)*

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