TMI Blog2019 (2) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... emand of the matter for the limited purpose of enabling reworking of the tax liability - this is a fair request and is therefore acceded to. Demand of Interest - Held that:- Section 73 (3) of the Finance Act, 1994 provides for very similar situation where the assessee can pay up the tax liability short paid on the basis of his own assessment or being pointed by the proper officer before issue of notice on him. However Explanation (1) to sub-section clearly indicates that interest under Section 75 ibid shall also be payable on the amount so paid by the person under Section 73 (3). This being so, there is no escape from interest even when the appellants had paid up the entire tax liability before issue of SCN - demand of interest upheld. CENVAT Credit - invocation of Rule (9) (1) (bb) of CCR - Held that:- Since the tax amount of ₹ 6,21,24,362/- has been paid by them under reverse charge mechanism which specifically fits under Section 9 (e) ibid, the credit has therefore been availed by the appellants not under Rule 9 (bb) but under Rule 9 (e) of the CCR 2004 - this contention is found to be correct - There is no doubt that the demand of ₹ 6,21,24,362/- was made unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic sales of the automobiles and as the case may be local spare parts manufactured pursuant to the agreement. From the investigations, it appeared appellants had made provisions in their books of account towards royalty payment to NML for the period from July 2010 and March 2011, but had not discharged service tax liability as a recipient of service. It also emerged that the appellants had also not assessed their own liability and disclosed in statutory returns filed by them. Hence a show cause notice dt. 13.01.2012 was issued inter alia proposing demand of service tax liability of ₹ 6,21,24,362/- with interest thereon and imposition of penalties under various provisions of law. In adjudication, the Commissioner vide impugned order dt.28.02.2013 inter alia confirmed the proposed demand with interest thereon, appropriated amount of ₹ 6,21,24,362/- paid up by appellant on 2.5.2011 and imposed equal penalty under Section 78 of the Finance Act, 1994. Penalty was also imposed under Section 77ibid. Hence appeal ST/42260/2013. 2. Another show cause notice dt. 09.01.2014 was also issued to appellants. The said notice after making reference to earlier SCN dt. 13.1.2012 had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not intend to contest the same. However, appellant has already conveyed in the previous date of hearing on 10.01.2018 that their appeal is now restricted only to interest and penalty. (viii) In respect of Appeal ST/42153/2014, he submitted that invocation of Rule 9 (1) (bb) of Cenvat Credit Rules, 2004 is not sustainable in their case since no suppression can be involved in the demand of ₹ 6,21,24,362/- made in the earlier SCN dt. 13.1.2012 as since as already pointed out, they were all along making provision of the service tax payable in their books of accounts. Ld. consultant also pointed out that they had only made provision in their books of accounts but actual payment for the entire year was effected only on 02.05.2011. (viii) Ld. Consultant further points out that on reworking tax liability, appellants have realized that they should have discharged only ₹ 5,79,21,902/- as against demanded tax of ₹ 6,21,24,362/- since they have paid up liability in entirety they have paid excess amount of ₹ 42,02,460/-. Ld. Consultant submits that this was flagged at the stage of adjudication in their reply to SCN dt. 29.2.2012. It is also taken note of by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case. 8.1. In Appeal ST/42266/2013 the dispute concerns exigibility of service tax with respect to the provisions made in the books of account towards payment of royalty for the period from July 2010 to March 2011 amounting to ₹ 60,31,49,154/-. During the course of hearing, Ld. Consultant has submitted that the tax liability demanded in the impugned order dt. 28.02.2013 of ₹ 6,21,24,362/- is not contested by the appellant and is contesting the interest and penalty liability. This being so, we do not interfere with that portion of the impugned order demanding the said tax liability. So ordered. 8.2 Ld. Consultant has submitted that out of the total demand of ₹ 6,21,24,362/- an amount of ₹ 5,59,11,926/- relates to service tax on technical assistance fees which the appellants paid up although no tax was payable in the light of judicial precedents. The remaining liability of ₹ 62,12,436/- relates to service tax on trade mark fees which also was deposited before issue of the SCN. Ld. consultant submits that though appellants are not contesting liability on merits, however, they are required to have discharged only ₹ 5,79,21,902/- agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have immediately appellants paid up the entire tax liability. We find that these are all mitigating factors. The very fact that appellants had been meticulously making provision and only providing in the books of accounts also indicates that they had no intention to hide facts that they are required to pay royalties hence it would not be proper to saddle them with the charge of suppression of facts with intention to evade payment of duty. In the circumstances, we are of the considered opinion that imposition of penalty of ₹ 6,21,24,362/- under Section 78 ibid is an over kill and unjustified and hence cannot be sustained. Penalty under Section 78 is therefore set aside and the appeal in this regard is allowed. However no interference is made with respect to the penalty imposed under Section 77 ibid. So ordered. 10. In Appeal E/42153/2014 the dispute relates to denial of cenvat credit invoking Rule (9) (1) (bb) and concerns alleged availment of ineligible input service of ₹ 6,12,42,362/- wherein IPR become recoverable from appellants on account of SCN dt. 13.01.2012 issued to them demanding the equal service tax under Section 73 (1) ibid. The adjudicating authority in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Section 3 of the Customs Tariff Act, 1975 shall be admissible; Provided further that in case of the second stage dealer receiving imported goods under an invoice bearing an indication that the credit of additional duty of customs levied on the said goods under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be admissible, the said dealer shall on the resale of such imported goods, indicate on the invoice issued by him that no credit of the additional duty levied under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 shall be admissible. Explanation. - For the purposes of this rule, first stage dealer and second stage dealer shall have the meanings assigned to them in Cenvat Credit Rules, 2002. A combined reading of Rule 11(3), Rule 11(7) of Central Excise Rules, 2002 and Rule 9(a)(ii) of the Cenvat Credit Rules, 2004 will convey that in case of sale of imported goods by a first stage dealer or second stage dealer also the credit is admissible on the basis of such a sale invoice. A similar situation will exist for supplementary invoice issued by a first stage dealer/second stage dealer under Rule 9(1)(b) of Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admissible as Cenvat credit to the appellant under Rule 9(1)(c) of the Cenvat Credit Rules, 2004. In view of the above settled position of law, the credit was rightly availed by the appellant and accordingly the appeal filed by the appellant is required to be allowed. Once on merits the issue is decided in favour of the appellant, there is no question of imposing penalty and confiscation of capital goods as adjudicated by the lower authority. 11. In the light of the discussions herein above, we hold that no suppression can be foisted on the appellant in respect of tax liability of ₹ 6,21,24,362/- which has been paid after being pointed out to them, before issue of SCN. Hence, the impugned order cannot be sustained and will require to be set aside, which we hereby do. To sum up: (A) in respect of Appeal ST/42260/2013 (1) With respect to the quantum of tax demanded, the matter is remanded to the adjudicating authority for the limited purpose of examining the appellant s contention that amount of ₹ 42,02,460/- has been paid in excess. (2) Interest on the tax liability that may be revised upon such readjudication is required to be paid by the appellants as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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