Whether penalty leviable for incorrect utilization of excess credit balance?

PJ/Case law/2014-15/2208

Case:- CENTRAL WAREHOUSING CORPN. Vs COMMR. OF SERVICE TAX, AHMEDABAD

Citation:- 2013 (30) S.T.R. 556 (Tri. - Ahmd.)

Brief facts:- The facts of the case, in brief, were that the appellant was engaged in providing taxable services under the category of ‘Storage and Ware Housing Service’, Cargo Handling Service, Transport of Goods by road and Clearing Services. During the course of audit, it was found that they had availed excess cenvat credit of Rs. 4140/- wrongly on the invoices issued by the service provider of Rent-a-Cab Service by correcting the original amount of the invoices at the time of payment when rate difference was raised. It was noticed that the amount mentioned in the invoices have been corrected by the appellant himself to arrive at the new rate at the time of payment. The invoices issued by the service provider can be corrected only by the service provider and not by the appellant. The credit of service tax amount can be availed only on the basis of taxable value as mentioned in the invoices and not on the basis of corrected amount. On pointing out the same, the appellant had not agreed with the objection and stated that the Service Tax amount availed by them was correct since they have made the payment to the service provider. Also the appellant had not followed the provisions of Rule 6(3)(c) and utilised excess credit thereby wrongly utilised credit equivalent to Rs. 4,77,346/-. Accordingly, show cause notice dated 27-1-2010 was issued, matter was adjudicated and cenvat credit of Rs. 4,81,486/- was disallowed under Section 73(1) of the Finance Act, 1994 read with Rule 14 of Cenvat Credit Rules, 2004 and imposed penalty under Sections 75, 76, 77 and 78 of the Finance Act, 1994.

Aggrieved by such an order the appellant preferred an appeal before the first appellate authority and the first appellate authority, after considering the submissions made, had reduced the demand of service tax liability to Rs. 92,362/-, along with interest and also imposed equivalent amount of penalty under Sections 76 and 78 of the Finance Act, 1994. Hence the appellant was before Tribunal.

Appellant’s contention:- Learned Chartered Accountant on behalf of the appellant submitted that the demand had been raised only on the ground that the appellant had availed excess Cenvat credit than the amount which they could have utilised in the month of August and December 2007. It was his submission that the said utilisation was reflected in the returns which they filed with the authorities and subsequently, the same was made good in the next month. It was his submission that there was no intention to evade the service tax liability. He submitted that in this case the issue was barred by limitation as the show cause notice had been issued on 27-1-2010.

The learned Chartered Accountant submitted that the both the lower authorities had not appropriated the amount already reversed by them in their records and it was informed to them vide ST-3 returns. Since the appellant had already reversed the same in their records, the order-in-original confirming the demand was appropriated against the amount already paid by them. As regards the interest amount, it was his submission that the same may be calculated by the revenue and on being informed to the appellant, they will discharge the same in due course.

Respondent’s contentions:- Learned departmental representative reiterated the findings of the lower authorities.

Reasoning of judgment:- After careful consideration of the submissions made by both sides and perusal of the record, the Hon’ble judge found that the issue was in narrow compass as to whether the appellant was required to be saddled with the equivalent amount of penalty under Sections 76 and 78 of the Finance Act, 1994, for incorrectly utilising the excess amount of Cenvat credit for discharge of service tax liability. On perusal of the record, he found that there was enough balance available with the appellant and the excess utilisation seemed to be an inadvertent error. This inadvertent error had been made good by the appellant on their own by adjusting and debiting the amount in the Cenvat credit available with them. Subsequent scrutiny had resulted in issuance of show cause notice to the appellant and the show cause notice had been issued after three years. Since the credit was available with the appellant and the excess amount inadvertently utilised was debited in the very next month, though it happened twice, he found that there was no intention to evade the service tax liability as the appellant had been regularly filing returns with the lower authorities. He found that, this was fit case, for invoking the provisions of Section 80 and set-aside the penalty imposed by the lower authorities under Sections 76 and 78 of the Finance Act, 1994, on the ground that the appellant being a PSU, and also having paid the amount on their own on being noticed.

In view of the foregoing, in the facts and circumstances of this case, Hon’ble judge set-aside the penalties imposed under Sections 76 and 78 of the Finance Act, 1994 by invoking the provisions of Section 80 of the Finance Act, 1994.

Decision:- Appeal was allowed.

Comment:- The analogy drawn from the case is that if there is enough Cenvat balance available with the assessee and the excess utilization seems to be an inadvertent error, and this error has been made good by the assessee on their own by adjusting and debiting the amount in the Cenvat credit available with them, and also the assessee is regularly filing returns, then there lies no intention to evade tax. Hence the assessee cannot be penalized by extending the benefit of provision of Section 80 of the Finance Act, 1994.

Prepared by: Ranu Dhoot

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PJ/Case law/2014-15/2208

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