2009 (10) TMI 8 - AT - Service Tax

Cenvat Credit on outward transportation GTA service as input service held that - by reversing the Cenvat credit, the appellant was not retaining any money belonging to the Government and by payment in cash and reversal of debit entry, only procedural irregularity was rectified. The liability of interest has been prescribed where the appellant retains the money which may be due to be paid to the Government which is not the case here

Summary

Issues:
- Appeal against Commissioner (Appeals) orders regarding payment of service tax using Cenvat Credit
- Liability for interest on service tax payment

Issue 1: Appeal against Commissioner (Appeals) orders regarding payment of service tax using Cenvat Credit
The Revenue appealed against the orders passed by the Commissioner (Appeals) concerning two respondents who paid service tax on outward transportation charges using Cenvat Credit. The Commissioner held that utilizing Cenvat credit for service tax payment was incorrect. The appellants then appealed to the Tribunal. During the proceedings, the appellants' consultant acknowledged that a similar issue was before a Larger Bench. The appellants offered to pay the service tax in cash, leading to a direction to pay in cash while restoring the Cenvat account entry. The Revenue appealed against the Commissioner's decision, which set aside the interest liability as well.

Issue 2: Liability for interest on service tax payment
The Revenue contended that once it was acknowledged that reversing Cenvat credit for service tax payment was incorrect, the statutory interest liability could not be waived by any quasi-judicial authority. The Commissioner's order addressed the interest recovery under Section 75 of the Finance Act, 1994. The Commissioner noted that prior to a specific date, payment of service tax through Cenvat credit was an accepted mode. As the appellants paid the service tax through Cenvat credit on time, there was no failure to pay on time, and no financial benefit was gained by not initially paying in cash. The Commissioner relied on a Tribunal decision to set aside the interest recovery. The Revenue argued that the Commissioner wrongly relied on a decision applicable to a different situation involving total payment in cash. The Tribunal found that the appellants rectified a procedural irregularity by reversing the Cenvat credit and paying in cash, without retaining government funds. While interest might be due strictly, the Tribunal considered the voluntary rectification of the irregularity and the lack of appeal by the department against setting aside the penalty. The Tribunal rejected the Revenue's appeals to settle the issue in the interest of justice.

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