No penalty imposable under section 78 if no allegation of wrong availment of benefit of notification in SCN.

PJ/Case Law/2013-14/2046

Case:-REGAALIS VERSUS COMMISSIONER OF C. EX., CUS. & S.T., MYSORE

Citation:- 2013 (31) S.T.R. 629 (Tri. - Bang.)

Brief Facts:-The relevant facts in brief are that the appellants, a provider of taxable services were availing credit of Service Tax paid on "input services". Notification No. 1/2006-S.T., dated 1-3-2006 came to be issued providing for abatement of 40% on gross amount charged by the service provider while determining the value on which Service Tax should be paid. They availed the benefit of the Notification. However, undisputedly, they failed to fulfil the condition for availing the said notification inasmuch as they continued to avail the Cenvat credit on the "input services". It appears that there was audit of the unit by the department and on 7-11-2008, the appellants paid the wrongly taken credit amounting to Rs. 2,06,790/- along with interest of Rs. 33,575/- and intimated the jurisdictional Superintendent of Service Tax. A letter dated 15-12-2008 stands issued by the Superintendent to the assessee alleging short payment of Service Tax in view of double benefit of taking Cenvat credit as well as availment of abatement of 40% on taxable value in terms of Notification No. 1/2006-S.T. Thereafter show-cause notice dated 12-1-2009 was issued alleging that credit taken was irregular and proposing to adjust the amount already paid along with interest and proposing penalties. Original authority confirmed the demand and appropriated the amount already paid but refrained from imposing any penalties. Commissioner, in exercise of the powers under Section 84 of the Finance Act, proposed revision and imposed penalty of Rs. 2,06,790/- under Section 78 of the Finance Act.

Appellant Contentions:-The appellant submits that they were availing the credit even prior to the coming of Notification No. 1/2006. It is a mistake in not noticing the condition of the notification. However, on the mistake coming to their notice, they promptly paid the amount involved along with interest due thereon. If the department felt that the condition of the notification has been violated, the proper course of action would be to have issued a show-cause notice for denying the benefit of the notification. There was nothing irregular in taking the credit of the Cenvat on the "input services". The original authority rightly did not impose the penalty. The Order-in-Revision cannot be sustained inasmuch as there was no allegation in the original show-cause notice dated 12-1-2009 about wrong availment of the benefit of the notification.

Respondent Contentions:-The Respondent reiterates the findings and reasoning of the Commissioner.

Reasoning of Judgment:-We have carefully considered the submissions and perused the records. It is no doubt a case of availing double benefit, namely the benefit of Notification 1/2006-ST. and also availing Cenvat credit. The benefit which should have been denied is the benefit availed under the notification as the conditions of the notification stood violated. The department has not issued show-cause notice proposing to deny the benefit of exemption under the notification. Under these circumstances, the act voluntarily reversing the credit taken along with interest stands rightly accepted by the original authority. No provision has been cited to show that the credit initially-availed by them was irregular. In view of the peculiar facts and circumstances of the case, the order of the revisionary authority in imposing penalty under Section 78 cannot be sustained. The order is set aside and the appeal is allowed with consequential relief as per law.

Decision:-Appeal allowed.

Comment:-This is a very good case wherein it was held that when there was no allegation in the show cause notice as regards wrong availment of the benefit of abatement notification, penalty cannot be imposed under section 78 for wrongly availed credit reversed along with interest. This indicates that improper drafting of show cause notice may prove to the benefit of the assessee.

Comments

PJ/Case Law/2013-14/2046

Post a Comment

Query