Credit availment of trading activity and penal provisions.

PJ/Case Law/2014-15/2360

Case:-ROBERT BOSCH ENGINEERING AND BUSINESS SOLUTION LTD. VERSUS CCE BANGLORE-LTU

Citation:-2014-TIOL-716-CESTAT-BANG

Brief Facts:-Both sides agree that the appeal itself can be decided since the issue lies within a narrow compass. The issue involved is eligibility of the CENVAT credit of service tax paid on certain software which was installed in the equipments and exported by the appellants. Appellant besides being engaged in export of software has availed credit on various services. Besides a regular activity of preparation of software on which tax is payable and they exported the service, appellant also is engaged in trading activity. There was an omission on the part of the appellant in not reversing the credit attributable to trading activity in respect of CENVAT credit availed by them. As soon as it was pointed out, the appellant calculated the amount payable and reversed the CENVAT credit of Rs.2,31,605/- attributable to such trading activity. Thereafter proceedings were initiated which has culminated in demanding of interest and imposition of penalty.

Appellant Contentions:-Learned CA submits that the appellant being an exporter of service, always has surplus in cenvat credit account and they regularly claimed refund of service tax/tax paid on such input services and therefore the question of utilising the credit does not arise. He also submits that the amount involved in respect of trading activity is miniscule when the total volume of export of service is taken into account. He submits that there was no intention to evade or avail refund of CENVAT credit and trading activity being the minor activity of the appellant this escaped their tax. He submits that in view of the fact that excess credit was always available, it can be said that they have not utilized the credit at all and therefore interest was not payable. Further he also submits that taking an overall size of the appellant and size of the trading activity, there was reasonable cause for non-reversal of CENVAT credit and submits that the provisions of Section 80 of Finance Act 1994 may be invoked.

Reasoning of Judgment:-Tribunal considered the submissions made by the learned CA. As regards interest, after the decision of the Hon'ble Supreme Court, the matter is no longer res integra and appellant is liable to pay interest even if the credit is not utilized. That being the position, the demand for interest made by the appellant has to be upheld and is accordingly upheld.
Having regard to the submission made by the learned CA and size of the appellant and also the fact that the amount involved is small and appellant voluntarily reversed the credit, it was considered that this is a fit case for waiver of penalty by invoking the provisions of Section 80 of the Finance Act 1994. In the result the appeal is decided by confirming the demand for wrongly availed CENVAT credit, interest thereon and setting aside the penalty imposed on the appellant.

Decision:- Appeal partly allowed.

Comment:-The crux of this case is that interest is payable by the appellant even if cenvat credit was not utilised in view of the Apex Court judgment in the case of Ind Swift Laboratories Ltd. However, the penal provisions were dropped by invoking the provisions of section 80 by considering the quantum of credit reversal and no malafide intention to evade duty as credit was not utilized. It is worth observing that in the present scenario, no interest is payable if the credit wrongly taken has not been utilised by the assessee.

Prepared by: Hushen Ganodwala

Comments

PJ/Case Law/2014-15/2360

Post a Comment

Query