2021 (1) TMI 8 - AT - Service Tax

Reversal of CENVAT Credit - Banking and other Financial Services - It was alleged that the appellant has not complied with the provision of of Rule 6 (3B) of Cenvat Credit Rules, 2004 in as much as it has failed to pay on monthly basis, an amount equal to 50% of the credit availed on inputs and input services used for provision of output service of banking and other financial services - Penalty - HELD THAT - The perusal of Rule makes it clear that it require reversal of Cenvat Credit availed on inputs and input services used for provision for output service of Banking and Other Financial Services in each month but to an amount equal to 50% of the such credit availed. The Adjudicating authority below has acknowledged the reversal of credit by the appellant. However has held that reversal is not the equivalent to 50% of the total credit as is required under Rule 6 (3B) of the Cenvat Credit Rules in some of the months and, accordingly, to the extent of short reversal, the demand has been confirmed. It is also an admitted fact that at the time of filing Service Tax Returns after each six months, the short reversal of few of such months has been made good. Not only this, it is also an admission on part of department that due to deposits made at the time of filing the Service Tax returns the reversal becomes more than 50%. Thus, the issue stands squeezed to the effect as to whether adjustments of payment is permissible despite the mandate of monthly reversal of Cenvat Credit for an amount equal to 50% of the credit availed - A conjoint reading of these Rules make it clear that the adjustments of excess reversal of credit with short reversal and vise verse to that extent is statutorily permissible. This observation when clubbed with the admitted fact of excess reversal of Cenvat Credit by the appellant though at the time of filing the return is sufficient to hold that the allegation of authority below and findings against appellant are not sustainable. Thus, once there is an excess payment, malafide intention that too of tax evasion cannot be alleged qua the appellant. No doubt the period of one year of serving Show Cause Notice stands extended to 5 years had there been the intent to evade tax or there is suppression of tax but from the above discussion it is apparently clear that there is no evasion of tax /duty, no question of intent to evade at all arises. Admittedly entire Ledger Accounts duly supported by CA Certificate were submitted by the appellant to the authorities, the question of suppression of facts that too willful does not at all arises. Present is therefore, the case which is not covered by the proviso of Section 73 of Central Excise Act - mere failure to pay tax is not a justification for imposition of penalty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Original regarding Cenvat Credit reversal under Rule 6 (3B) of Cenvat Credit Rules, 2004.

Detailed Analysis:

Issue 1: Compliance with Rule 6 (3B) of Cenvat Credit Rules
- The appellant, engaged in financial services, faced allegations of non-compliance with Rule 6 (3B) for not paying 50% of the credit availed on inputs and input services monthly.
- Show cause notice issued for a demand of ?4,35,66,901 for the period October 2011 to September 2012.
- Order confirmed partial demand of ?22,71,183 along with interest and penalty under Section 78 of the Finance Act.
- Appellant argued excess payment of ?54,00,000 was made and deficiencies were rectified at the time of filing service tax returns.

Issue 2: Legal Permissibility of Adjustments
- Appellant contended that adjustments of duty liability are permissible as per Rule 6 (3A) and Rule 6 (4A) of the Cenvat Credit Rules and Service Tax Rules.
- Tribunal cited cases like AC Nielson Org. Marg Pvt. Ltd. v. Commissioner of Service Tax, Mumbai-II and Principal Commissioner vs. M/s. Godrej Consumer Products Ltd. to support the permissibility of adjustments.

Issue 3: Allegations of Malafide Intent and Penalty Imposition
- Appellant argued that excess payments and submission of ledger accounts negate any malafide intent to evade tax.
- Tribunal emphasized that failure to pay tax is not a justification for imposing penalties, citing various legal precedents.
- Adjudicating authority's imposition of penalty was deemed baseless and in ignorance of statutory principles allowing for adjustments.

Conclusion:
- The Tribunal set aside the order under challenge, allowing the appeal based on the legal permissibility of adjustments, lack of malafide intent, and improper penalty imposition.
- The judgment highlighted the importance of statutory provisions, legal precedents, and the submission of accurate documentation in tax-related disputes.