Voluntary tax payment before notice limits exposure to interest and penalty; extended limitation cannot deny Cenvat credit without fraud.
Voluntary payment of service tax before the show cause notice left only interest and penalty in issue, and the appellate relief was confined to those consequences. The court treated the mistaken use of the word "tax" in the appellate order as immaterial because the substance of the decision was limited to interest and penalty. On Cenvat credit, denial based on limitation failed because the notice was issued after the normal period and the authorities had found no fraud or suppression. In the absence of conditions for the extended period, the credit could not be denied, and the assessee was entitled to the benefit claimed.
Issues: (i) Whether the demand of interest and penalty could be sustained when the assessee had deposited the service tax before receipt of the show cause notice. (ii) Whether denial of Cenvat credit on input services was justified when the notice was issued beyond one year and no fraud or suppression was found.
Issue (i): Whether the demand of interest and penalty could be sustained when the assessee had deposited the service tax before receipt of the show cause notice.
Analysis: The liability to pay service tax had already been discharged voluntarily before issuance of the show cause notice. The adjudication proceedings, therefore, survived only to the extent of interest for delayed payment and penalties. A mistaken reference to "tax" in the appellate order did not alter the substance of the relief granted, which was confined to interest and penalty.
Conclusion: The order setting aside the demand was confined to interest and penalty and no substantial question of law arose against that part of the decision.
Issue (ii): Whether denial of Cenvat credit on input services was justified when the notice was issued beyond one year and no fraud or suppression was found.
Analysis: The authorities recorded a factual finding that there was no fraud or suppression. The notice was issued after expiry of the normal limitation period. In the absence of the conditions required for invocation of the extended period, the Revenue could not deny the benefit of input service credit on that basis.
Conclusion: Denial of Cenvat credit was not sustainable and the assessee was entitled to the benefit claimed.
Final Conclusion: The appeal failed, as no substantial question of law arose and the assessee succeeded on both issues.
Ratio Decidendi: Where tax is voluntarily paid before the show cause notice, only interest and penalty can survive if legally exigible, and the extended period cannot be invoked in the absence of fraud or suppression to deny consequential credit benefits.
TaxTMI 
AI Drafter ✕
TaxTMI 
