2019 (2) TMI 1556 - AT - Central Excise

Demand of interest and penalty - Irregular availment of CENVAT Credit - Held that - Hon ble Karnataka High Court in the case of Vilax Industries Fabric 2018 (7) TMI 1369 - KARNATAKA HIGH COURT has upheld the decision of the Tribunal and dismissed the appeal of the Revenue by holding that if the CENVAT credit is reversed without utilization then no interest and penalty is payable. The imposition of penalty of ₹ 9,910/- under Section 78 with regard to the Man Power Supply Agency Service is also not sustainable because the appellant has paid the Service Tax along with interest before the issuance of SCN as far as this Service Tax is concerned. The demand of interest and imposition of penalty is bad in law - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Irregular CENVAT credit availed by the appellant
- Short paid Service Tax for "Man Power Supply Agency Service"
- Double availed CENVAT credit on legal fee
- Confirmation of demand by the Asst. Commissioner
- Rejection of appeal by the Commissioner (A)

Irregular CENVAT Credit:
The appellant, engaged in sugar and molasses manufacturing, was found to have irregularly availed CENVAT credit and short paid Service Tax during an audit. A show cause notice (SCN) was issued proposing a demand for irregular CENVAT credit and Service Tax. The Asst. Commissioner confirmed the demand, imposed penalty and interest, which was later rejected by the Commissioner (A). The appellant argued that the credit was reversed before utilization, citing legal precedents. The Tribunal, after considering submissions, relied on previous decisions and held that if CENVAT credit is reversed without utilization, no interest or penalty is payable. The impugned order was set aside, allowing the appeal.

Short Paid Service Tax:
Regarding the short paid Service Tax for "Man Power Supply Agency Service," the appellant had paid the tax along with interest before the SCN was issued. The Tribunal found the imposition of penalty not sustainable in this case. Citing the payment made by the appellant before the issuance of the SCN, the Tribunal held that the demand of interest and penalty was unjustified, ultimately allowing the appeal with consequential relief.

Double Availed CENVAT Credit:
The issue of double availed CENVAT credit on legal fees was not specifically addressed in the detailed analysis provided in the judgment. However, it can be inferred that this issue was likely considered along with the irregular CENVAT credit issue, as both involved the reversal of credit before utilization and the applicability of interest and penalty.

Confirmation of Demand by Asst. Commissioner and Rejection by Commissioner (A):
The Asst. Commissioner had confirmed the demand of irregular CENVAT credit and Service Tax, imposing interest and penalty. The Commissioner (A) rejected the appeal filed by the appellant. However, the Tribunal, after examining the legal arguments and precedents cited by the appellant, concluded that the demand of interest and imposition of penalty were legally unsustainable. As a result, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the judgment by the Appellate Tribunal CESTAT Bangalore addressed the issues of irregular CENVAT credit, short paid Service Tax, and the confirmation of demand by the Asst. Commissioner, ultimately setting aside the impugned order and allowing the appeal of the appellant based on legal precedents and the reversal of credit before utilization.