On short payment of service tax and Excess availment of Cenvat credit by the assessee, whether penalty imposed?

PJ/CASE LAW/2015-16/2991

Case-THAI AIRWAYS INTERNATIONAL PUBLIC CO. LTD. VersusC.S.T. (ADJN)., NEW DELHI

Citation-2015 (38) S.T.R. 999 (Tri. - Del.)

Brief Facts-The appellant is in appeal against the impugned order for imposition of penalty under Section 78 of Finance Act, 1994 and under Rule 15(3) of the Cenvat Credit Rules, 2004 read with Section 77 of the Finance Act, 1994 and penalty under Rule 15A of Cenvat Credit Rules, 2004.The facts of the case are that audit was conducted during the period 21-1-2010 to 3-2-2010. It was found that during the period May, 2006 to March, 2007, the appellant made short payment of Service Tax of Rs. 7,18,001/-. It was also found that during the period June, 2006 to March, 2007, the appellant was entitled to take 20% of the Cenvat credit of Service Tax paid for providing outward exempted service, but they have availed 100%, on that count, they have taken excess Cenvat credit of Rs. 23,71,100/-. On pointing out by the audit team, the whole of the amount was paid by the appellant during the period March, 2010 to June, 2010 along with interest and intimated to the department on 8-6-2010. Thereafter, the show cause notice was issued for appropriation of the amount paid by the appellant along with interest and for imposition of various penalties under Finance Act and for violation of Cenvat Credit Rules. The appellant is not disputing their liability of Service Tax along with interest. They are only contesting the imposition of penalty on the premise that as they have paid the entire Service Tax along with interest on pointing out by the department. Therefore show cause notice was not required to be issued as per Section 73(3) of Finance Act, 1994.

Appellants Contention-The contention of the learned Consultant for the appellant is that as the appellant has committed bona fide mistake, as in the case of demand of Service Tax of Rs. 7,18,001, in some cases appellant has paid excess amount of Service Tax and in some cases, short payment. Therefore, it was inadvertent mistake committed by the appellant and there was no mala fide intention for the appellant to make short payment of Service Tax. For the demand of Rs. 23,71,100/-, it is the contention of the learned consultant that the appellant was not knowing the provision of Cenvat credit which is restricted to 20% in case of outward exempted service. Therefore, the benefit of Section 80 of the Finance Act is to be given to the appellant and penalty to be dropped.

Respondents Contention-On the other hand, learned AR opposed the contention of the learned Consultant and submits that if the audit would not have conducted in the premises of the appellant, the truth could not have unearthed. The appellant could have enjoying the short payment of Service Tax and availing inadmissible Cenvat credit. Therefore, the penalties are rightly imposed on the appellants.

Reasoning of Judgement-Heard both sides. Considered the submissions in detail. On perusal of the record, tribunal find that appellants in some cases made the excess payment in some cases and in some cases paid short payment. It might be on account of calculation errors but same is not coming out from the facts but it is a fact that excess Service Tax has been paid and in some cases, short Service Tax has been made, therefore, I hold that it is inadvertent mistake committed by the appellant. In these circumstances, the benefit of Section 80 of the Finance Act is to be given to the appellant and therefore, penalty on this count for Rs. 7,18,001/- is set aside. Further, for availment of inadmissible Cenvat credit of Rs. 23,71,100/-, They find that appellant is entitled to take Cenvat credit only up to 20% of Cenvat credit. In the case of Service Tax for outward exempted service, it is the admission of the appellant that they are not maintaining separate accounts. Therefore, they are not entitled to take Cenvat credit more than 20%. Further they find that if the audit had not been conducted in the premise of the appellant, this fact would not have come in the knowledge of the department, therefore, they hold that on these count, appellant is liable to be penalized. As appellant has paid entire amount of Service Tax along with interest before issuance of show cause notice, therefore penalties are restricted to 25% of the Service Tax involved. In these terms, appeal is disposed.

Decision-Appeal disposed of

Comment-The substance of the case is that as in the given case the assessee has made Excess and short payment of service tax due to the inadvertent mistake or on account of calculation errors and he is eligible for the benefit of Section 80 of Finance Act, 1994. And, therefore the requirement of penalty imposed vide section 77 shall also be waived. further issue which is as regards to the inadmissibility of excess Cenvat credit taken. Since the assessee is providing outward exempted service but not maintain separate accounts the assessee is not entitled to take Cenvat credit more than 20%.But according to the facts provided in the given case that 100% credit disclosed by audit conducted in assessee’s premises, assessee is liable to be penalized. But since the assessee paid entire amount of Service Tax along with interest before issuance of SCN the penalty should be restricted to 25% of Service Tax involved which is in accordance with the Rule 15 of Cenvat Credit Rules, 2004.

Prepared By-Neelam Jain

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PJ/CASE LAW/2015-16/2991

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