2015 (12) TMI 328 - AT - Service Tax

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 - Held 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 ₹ 7,18,001/- is set aside. Further, for availment of inadmissible Cenvat credit of ₹ 23,71,100/-, I 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 I 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, I hold that on these count, appellant is liable to be penalized - Penalty is reduced - Decided partly in favour of assessee.

Summary

Issues:
Imposition of penalty under Section 78 of Finance Act, 1994 and under Rule 15(3) of the Cenvat Credit Rules, 2004; Entitlement to Cenvat credit; Contesting the imposition of penalty based on payment made before show cause notice issuance.

Analysis:
The appellant appealed against the imposition of penalties under various sections of the Finance Act and Cenvat Credit Rules. The audit revealed that there was a short payment of Service Tax and an excess availing of Cenvat credit during specific periods. The appellant rectified the discrepancies by paying the outstanding amount along with interest before a show cause notice was issued. The main contention was whether penalties were justified given the rectification made by the appellant before the notice. The appellant argued that the mistakes were inadvertent and not intentional, seeking relief under Section 80 of the Finance Act.

The consultant for the appellant claimed that the errors were due to bona fide mistakes, emphasizing that there was no mala fide intention behind the discrepancies. On the other hand, the respondent argued that without the audit, the incorrect payments would not have been discovered, implying that penalties were warranted. After hearing both sides, the tribunal examined the case in detail.

Upon review, the tribunal acknowledged that there were both excess and short payments made by the appellant, possibly due to calculation errors. The tribunal concluded that the mistakes were inadvertent, leading to the decision to set aside the penalty for the short payment of Service Tax. However, regarding the excess availing of Cenvat credit, the tribunal found that the appellant was only entitled to 20% of the credit for outward exempted services. Since the appellant did not maintain separate accounts, they were not eligible for the full credit amount. The tribunal noted that without the audit, these discrepancies would not have been detected, justifying the penalties imposed on the appellant.

Considering that the appellant had paid the entire Service Tax amount along with interest before the show cause notice, the tribunal limited the penalties to 25% of the Service Tax involved. Consequently, the appeal was disposed of based on these findings.