2023 (3) TMI 947 - AT - Central Excise

CENVAT Credit - reverse charge mechanism - case of the department is that since the appellant have paid the service tax on reverse charge mechanism on 13.07.2017, the same was not available as cenvat credit as on 30.06.2017 - levy of penalty - HELD THAT - There is no dispute in the fact that the appellant have discharged the service tax under reverse charge mechanism in respect of the services received in the month of June, 2017 and payment of service tax was made in 13.07.2017. The appellant have filed the ST-3 return for the period ending on 30.06.2017 on 10.07.2017. The appellant have reflected the cenvat credit of service tax paid on 13.07.2017 of the said return on 30.06.2017. Since the service tax was paid on 13.07.2017 by no stretch of imagination the same could have been mentioned in the ST- 3 return filed on 10.07.2017. Moreover, even the circular issued in this regard is applicable to only those cases where the service tax was paid by 05th /06th of July , 2017 or at the most the same is paid before filing the return. In case of the service tax payment made after filing the return the assessee was supposed to file a revised return incorporating the cenvat credit paid of service tax on RCM which appellant has failed to do. The appellant cannot get the benefit of the Circular dated 28.09.2017. Accordingly, the payment of duty made by utilizing the cenvat credit in the facts of the present case is not legal and correct. The right course of action for the appellant was either to revise the return and show the adjustment or claim the refund of cenvat credit under section 142 (3) of CGST Act, 2017. Therefore the appellant s availment of cenvat credit of service tax paid on 13.07.2017 and utilization thereof for payment of excise duty for the month of June, 2017 is not correct. Therefore, the demand of cenvat credit is sustained - the appellant has liberty to opt for alternate i.e. filing a revised return or claiming refund under Section 142 (3) of CGST Act, 2017 if permissible as per law. Levy of penalty - HELD THAT - Since there is no intention of the appellant to evade any duty as the appellant have discharged the service tax and utilized the same though incorrectly but it was a revenue neutral situation as the appellant is otherwise entitled for the refund of the same amount. Hence, in absence of any mala fide penalty under section 78 is not imposable. Therefore, the penalty imposed under section 78 is set aside. Appeal allowed in part.

Summary

Issues involved:
The issue in this case revolves around the utilization of cenvat credit for payment of duty in relation to service tax liability under reverse charge mechanism for the month of June 2017, paid on 13.07.2017.

Summary of Judgment:

Issue 1: Utilization of cenvat credit for payment of duty:
The appellant had discharged the service tax liability under reverse charge mechanism for the month of June 2017 on 13.07.2017. The appellant claimed cenvat credit shown in the return of June 2017 and utilized it for payment of duty in the same month. The department contended that since the service tax was paid in July, the cenvat credit was not available as on 30.06.2017, hence could not have been adjusted towards the duty payment for June 2017. The Tribunal held that the appellant's utilization of cenvat credit for duty payment in June 2017 was not legal and correct. The appellant was directed to either revise the return to show the adjustment or claim a refund under Section 142(3) of the CGST Act, 2017.

Issue 2: Penalty under Section 78:
Regarding penalty, the Tribunal noted that there was no intention to evade duty as the service tax was paid and utilized, albeit incorrectly. It was considered a revenue-neutral situation as the appellant was entitled to a refund of the same amount. Therefore, in the absence of any mala fide intent, the penalty under Section 78 was set aside.

Conclusion:
The impugned order was modified to reflect the above decisions. The appeal was partly allowed in the specified terms.

This summary provides a detailed overview of the judgment, highlighting the key issues, arguments presented, and the Tribunal's decision on each aspect of the case.