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2012 (10) TMI 765 - AT - Service TaxDenial of CENVAT Credit of duty paid on capital goods - assessee contested against the denial as had filed the ST3 returns for the relevant period in November 2007 - no separate SCN issued - Held that:- In this case, after issue of Show Cause Notice, returns have been filed, credit has been shown and debits have been made. However, before the returns were filed, Show Cause Notice has already been issued and in reply to the Show Cause Notice, the respondent had already made the claim for CENVAT Credit of duty paid on capital goods which was required to be considered by the adjudicating authority. Thus just because the returns were filed subsequently, the requirement under the law for the adjudicating authority to consider availability of CENVAT Credit and allow the benefit of admissible CENVAT Credit while confirming the duty demand does not undergo a change Issue of another Show Cause Notice to deny the CENVAT Credit would only open a line for another round of litigation without any corresponding benefit to either side. The defence regarding the admissibility of CENVAT Credit canvassed by the assessee was considered by adjudicating authority and while doing so, the admissibility/in-admissibility of CENVAT Credit to the respondent was considered. Therefore, it cannot be said that the principles of natural justice for denying the CENVAT Credit available to the respondent did not become available to them in the absence of Show Cause Notice after filing of ST-3 returns with regard to the CENVAT Credit. If a Show Cause Notice was to be issued and separate proceedings were to be initiated, the original adjudicating authority would not have allowed the appropriation and would not have allowed the benefit of credit itself since it would have been the subject matter of another litigation and thereby the respondent would have been required to make payment in cash and later on file refund claim resulting in further litigation regarding unjust enrichment and other aspects. Thus the arguments advanced that a separate Show Cause Notice should have been issued for dis-allowing the CENVAT Credit after the returns were filed, have no merit. Once the claim that the CENVAT Credit was available and assessee's omission was only in following the procedure, his claim for the benefit of provisions relating to imposition of penalty under Section 80 of Finance Act, 1994 has to be considered favourably. Therefore, to the extent of availability of CENVAT Credit on capital goods to the respondent, penalty under Section 78 has to be waived - The benefit of payment of 25% of duty liability towards penalty subject to the condition that the entire amount of Service Tax liability, interest and penalty to the extent of 25% are discharged within one month from the date of communication of the order of the Tribunal, is extended. Thus assessee has to pay total service tax by debiting CENVAT Credit on capital goods received subsequent to 10.09.2004 and by paying balance in cash with interest and 25% of Service Tax paid in cash towards penalty within 30 days of receipt of this order and in case of failure, pay penalty equal to the Service Tax payable in cash.
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