2011 (7) TMI 566 - AT - Service Tax

Appellate Tribunal upholds credit extension for CVD payment, penalties restored for non-filing of returns

The Appellate Tribunal CESTAT, CHENNAI upheld the extension of credit for countervailing duty (CVD) paid on imported items, amounting to Rs.5,30,539.50, ... Cenvat credit denied - Held that:- There is no dispute that M/s.Noritsu (importers) discharged duty liability on the four items in dispute and there is no further dispute that the assessees took credit only of the duty paid on the items therefore, there can be no ground for denial of credit on technical ground, namely, that the invoices raised by M/s.Noritsu to Kodak India Ltd. and Kodak India Ltd. to the respondents were not proper documents as prescribed under Rule 9 of the CENVAT Credit Rules, 2004 for taking credit - Decided in fvaour of assessee. Penalty - As regards setting aside of penalty under Section 76 of the Finance Act, 1994, find that penalty under Section 78 has been retained by the lower appellate authority, although reduced - Since penalties under Section 76 and 78 cannot co-exist, there is no merit in the Revenues case for restoration of the penalty under Section 76 - However, as regards penalty under Section 77, it is required to be restored for non-filing of ST-3 returns by the respondents. Issues:1. Extension of credit for CVD paid on imported items2. Denial of credit based on technical grounds3. Setting aside of penalties under Section 76 and 77 of the Finance Act, 1994Extension of credit for CVD paid on imported items:The judgment revolves around the extension of credit for countervailing duty (CVD) paid on four specific items imported by M/s.Noritsu Koko Co.Ltd. and subsequently sold to M/s.Kodak India Pvt. Ltd., who then sold them to the assessees. The Commissioner (Appeals) had extended the credit for CVD paid on these items, leading to an appeal by the Revenue before the Tribunal. The Tribunal noted that there was no dispute that the importers had discharged the duty liability on the items in question, and the assessees had only taken credit for the duty paid on these specific items. The Tribunal held that there was no valid ground for denying credit based on technicalities, such as the nature of the invoices, as required under Rule 9 of the CENVAT Credit Rules, 2004. Consequently, the Tribunal upheld the extension of credit amounting to Rs.5,30,539.50.Denial of credit based on technical grounds:The Tribunal emphasized that since the assessees had only claimed credit for the duty paid on the specific items mentioned, there was no justification for denying the credit on technical grounds related to the invoicing process. The Tribunal's decision was based on the clear understanding that the duty liability had been discharged by the importers and that the assessees had legitimately availed credit for the duty paid on the imported items. This aspect of the judgment highlights the importance of ensuring that legitimate credits are not denied based on minor technical discrepancies in documentation.Setting aside of penalties under Section 76 and 77 of the Finance Act, 1994:Regarding the penalties imposed under Section 76 and 77 of the Finance Act, 1994, the Tribunal made distinct determinations. The penalty under Section 76 was not deemed necessary as the penalty under Section 78 had already been retained by the lower appellate authority, albeit in a reduced amount. The Tribunal clarified that penalties under Section 76 and 78 could not co-exist, leading to the rejection of the Revenue's plea for reinstating the penalty under Section 76. However, the penalty under Section 77 was reinstated due to the non-filing of ST-3 returns by the respondents. Additionally, the Tribunal acknowledged the assessees' argument that they had excess credit available, leading to the decision not to impose the mandatory penalty under Section 78. Ultimately, the appeal was allowed only to the extent of restoring the penalty under Section 77 of the Finance Act, 1994.This detailed analysis of the judgment from the Appellate Tribunal CESTAT, CHENNAI showcases the considerations and outcomes related to the extension of credit for CVD paid on imported items, denial of credit based on technical grounds, and the setting aside of penalties under Section 76 and 77 of the Finance Act, 1994. The judgment highlights the importance of upholding legitimate credit claims and ensuring that penalties are imposed judiciously based on the specific circumstances of each case.