2017 (4) TMI 896 - AT - Service Tax

CENVAT credit - duty paying documents - Held that - appellants have availed CENVAT credit on VAT and also on the personal telephone calls used by employees and also in some cases they have taken credit by double entry. Credit has been taken on documents for purchase of items and not on service tax. In certain cases no documents have been furnished at all. The appellants therefore have no case on merits. SCN has been issued invoking the extended period of limitation alleging suppression of facts with intent to evade payment of duty. Therefore as the Commissioner (Appeals) has recorded his finding that there is no intention on the part of appellant to evade payment of service tax the demand raised invoking the extended period also becomes unsustainable. Demand is time barred - appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged irregular availment of CENVAT credit, imposition of penalties, invocation of Section 80 of Finance Act, 1994, grounds of limitation, suppression of facts with intent to evade payment of tax, interpretation of Sections 73 and 80, applicability of extended period of limitation, absence of mala fide intention, harmonious reading of relevant provisions, setting aside penalties, demand being time-barred.

The judgment by the Appellate Tribunal CESTAT Hyderabad pertains to a case involving a public sector bank accused of irregularly availing CENVAT credit on improper documents and without proper documentation during a specified period. The original authority confirmed the demand for recovery of the credit along with interest and penalties. Upon appeal, the Commissioner (Appeals) remanded the matter for denovo consideration, resulting in the confirmation of a reduced demand and penalties. Subsequently, the Commissioner (Appeals) set aside the penalties invoking Section 80 of the Finance Act, 1994. The appellant challenged the demand of CENVAT credit before the Tribunal.

In the appeal, the appellant's counsel argued primarily on the grounds of limitation, emphasizing that the irregular credit availed was due to lack of familiarity with the law, as noted by the Commissioner (Appeals). The counsel contended that since there was no intent to evade service tax and penalties were set aside under Section 80, the demand should be considered time-barred. The appellant relied on a judgment in a similar case to support the argument that Sections 73 and 80 must be harmoniously interpreted.

On the other hand, the department reiterated the findings of the impugned order, highlighting that the appellant had availed credit on insufficiently detailed documents and inadmissible VAT payments. The Commissioner (Appeals) had set aside penalties under Section 78, citing reasonable cause for irregular credit availed by the appellant.

The Tribunal examined the allegations raised in the show cause notice, emphasizing the irregularities in availing CENVAT credit, including improper entries, inadmissible VAT credit, and lack of proper documentation. The Tribunal noted that the appellant's case lacked merit on the grounds of availing credit on items not subject to service tax and other irregularities. However, the Tribunal focused on the argument of limitation raised by the appellant, supported by the Commissioner (Appeals)'s finding of no intent to evade tax due to lack of familiarity with the law.

The Tribunal analyzed the harmonious interpretation of Sections 73 and 80, emphasizing the absence of mala fide intention and the applicability of reasonable cause for failure to pay duty. Citing precedents, the Tribunal concluded that if penalties were set aside under Section 80, the demand for the extended period could not be sustained. Ultimately, the Tribunal held that the demand was time-barred based on the absence of intent to evade payment of service tax and set aside the impugned order, allowing the appeal with consequential reliefs.

In conclusion, the judgment delves into the intricacies of CENVAT credit irregularities, penalties, limitations, and the interpretation of relevant provisions to determine the time-barred nature of the demand, ultimately ruling in favor of the appellant based on the absence of mala fide intention and the setting aside of penalties under Section 80.