2019 (4) TMI 1081 - AT - Service Tax

Levy of Interest and penalty - wrongly availed CENVAT Credit, but not utilized - Reversal of credit on being pointed out - also, there was always a surplus balance over and above the inadmissible Cenvat credit -Time Limitation - HELD THAT - The Show Cause Notice doesn t not bring out any allegation, of specific omission or commission on the part of the appellants, so as to establish intent to evade payment of duty. The Show Cause Notice merely states that the facts were brought to the Notice of department only during the course of Audit. It is not denied that the appellants were regularly filing the ST-3 returns. The Show Cause Notice doesn t specify when audit has taken place. It only states reversal was on 15- 2-2008. Show Cause Notice was issued 08/10/2012 - the department has not made any case for invoking extended period of time - SCN is barred by time limitation. As the issue is settled on limitation, there is no reason to go into merits of the issue - appeal is allowed on limitation.

Summary

Issues:
Challenge against demand of interest and imposition of penalty based on availing inadmissible CENVAT credit.

Analysis:
The appeal contested the order confirming the demand of interest and penalty for availing 100% CENVAT credit instead of 50% on duty paid on capital goods. The Appellant argued that despite inadvertently taking the inadmissible credit, it was not utilized for discharging output liability, maintaining a surplus balance. The Counsel cited the Supreme Court's explanation on tax, interest, and penalty distinctions. They highlighted Rule 14 of Cenvat Credit Rules, emphasizing the amendment clarifying interest liability only on utilized credit. Legal precedents were cited to support the argument that interest and extended period cannot be invoked without penalty under Section 78.

The Appellant further relied on various cases to support the argument that reversal of credit without utilization is permissible, and limitation applies to interest liability. The Counsel emphasized that disputes arising from statutory interpretation do not warrant penalty imposition, citing relevant cases. The Authorized Representative supported the original order, citing cases where interest was upheld. The Tribunal analyzed the issue of interest liability, considering the wordings of Rule 14, and concluded that the Appellants were not liable to pay interest due to the reversal of credit and absence of intent to evade duty. The Tribunal found the Show Cause Notice time-barred, citing precedents, and held that the demand of interest was hit by limitation. The appeal succeeded on the grounds of limitation, rendering the discussion on merits unnecessary.

In conclusion, the Tribunal allowed the appeal based on the limitation issue, emphasizing the absence of justification for invoking extended period and the time-barred nature of the Show Cause Notice. The decision highlighted the applicability of limitation to interest liability, aligning with legal precedents and supporting the Appellant's case.