2021 (10) TMI 535 - HC - Service Tax

Denial of CENVAT Credit with penalty - extended period of limitation - first year of service tax implementation - recovery of service tax not paid - failure to submit half yearly returns in time - service tax was not paid in time - suppression of facts or not - Section 73(1) of the Finance Act, 1994 - HELD THAT - The respondent-Bank has maintained separate accounts in respect of service tax and education cess. The service tax was implemented with effect from 10.09.2004. The Commissioner and the Tribunal both have arrived at a conclusion that the assessee are new to service tax matters. The Commissioner as well as the Tribunal have also arrived at a conclusion that the respondent-Bank has accounted service tax and education cess separately while making cash payments. The material on record does not indicate that the respondent-Bank has indulged in any one of the ingredients contemplated under Section 73 of the Finance Act, 1994 and therefore, the proviso to Section 73 of the Act would not be available to the revenue. The Commissioner was of the view that there was a technical lapse on the part of the respondent Bank - The service tax was implemented in the month of September 2005 and therefore, the material on record clearly indicates that there was no deliberate intent to evade tax and any lapse on the part of the respondent-Bank was rightly viewed by the authority as a technical lapse. There are no infirmity or illegality in the order under challenge - appeal dismissed.

Summary

Issues:
1. Correctness of the order passed by the Customs, Excise and Service Tax Appellate Tribunal.
2. Availing CENVAT credit by the respondent-Bank.
3. Allegations of irregular credit availed by the respondent-Bank.
4. Compliance with service tax provisions by the respondent-Bank.
5. Interpretation of Section 73(1) of the Finance Act, 1994.

Analysis:
1. The appeal challenges the order of the Customs, Excise and Service Tax Appellate Tribunal, which set aside the Commissioner's order alleging irregular credit availed by the respondent-Bank. The Tribunal found no intention to evade tax by the respondent-Bank, citing precedents like Vulcan Industrial Engineering Co. Ltd. and Bank of India.

2. The appellant argued that the respondent-Bank availed CENVAT credit without mandatory details and on services received before the service tax implementation date. The appellant contended that the respondent-Bank was not eligible for CENVAT credit on services received prior to output services.

3. The respondent-Bank maintained that it acted in good faith, furnishing details after collecting information from branches. The Commissioner found the respondent-Bank acted bonafidely but alleged irregular credit availed, leading to a demand and interest under Rule 14 of CENVAT Credit Rules, 2004.

4. Section 73(1) of the Finance Act, 1994 allows recovery of service tax for non-payment due to fraud, collusion, willful misstatement, or suppression of facts. The respondent-Bank maintained separate accounts for service tax and education cess, with authorities concluding no intent to evade tax and reasonable cause for delayed returns.

5. The Court upheld the Tribunal's decision, finding no illegality in the order. The respondent-Bank's actions were viewed as a technical lapse, not meeting the criteria for invoking the proviso to Section 73 of the Act. The appeal was dismissed for lack of merit, with no costs awarded.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive overview of the legal arguments and conclusions reached by the Court.