Appellate upholds service tax liability due to improper credit, penalty reduced on compliance.

The appellate authority confirmed the service tax liability due to the improper availment of Cenvat credit by the appellants for various services. The lack of evidence linking the claimed credit to their business activities led to the denial of relief. Additionally, the penalty under Section 80 of the Finance Act, 1994 was reduced to 25% of the service tax demand upon compliance within the specified period, while interest remained payable. Ultimately, the appeal was partially allowed with the tax demand upheld, albeit with a reduced penalty for timely compliance.

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Issues:
1. Admissibility of service tax paid on various services for adjustment against excise duty or service tax liability.
2. Connection of Cenvat credit claimed by assessee to the activities.
3. Levy of penalty under Section 80 of the Finance Act, 1994.

Analysis:
1. The counsel argued that service tax paid on club memberships, catering services, business auxiliary services, etc., should be allowed for adjustment against excise duty or service tax liability as these services are essential for the industry. However, the appellate authority found no evidence connecting the claimed Cenvat credit to the appellants' activities. Without proof that these expenses were necessary for carrying out business activities, relief could not be granted. Mere pleading without evidence does not warrant relief, leading to the confirmation of service tax liability for wrongful Cenvat credit availment.

2. The appellate authority emphasized the lack of evidence establishing the connection between the claimed Cenvat credit and the appellants' activities. Without proof that these expenses were essential for conducting business activities, relief could not be granted. The appellant's failure to satisfy the authority with evidence resulted in the confirmation of service tax liability for the improper availment of Cenvat credit. Consequently, interest was confirmed as a consequential aspect of the levy.

3. Regarding the levy of penalty, the appellant contended that being a new subject to the industry, relief should be granted under Section 80 of the Finance Act, 1994. However, since the Finance Act had been in force for nearly two decades, taxpayers were expected to be aware of its provisions. The appellant could only receive a concession by paying the entire dues within the stipulated time. Following the ratio laid down by the Hon'ble High Court of Delhi, the penalty could be reduced to 25% of the service tax demand if the appellant complied within the specified period. Ultimately, the tax demand was confirmed, interest became payable, and the penalty was reduced to 25% subject to compliance, resulting in the partial allowance of the appeal.

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