2013 (6) TMI 366 - AT - Service Tax

Tribunal rules against Vodafone in tax credit case, cites Ind-Swift; pre-deposit required

VODAFONE ESSAR CELLULAR LTD. Versus COMMR. OF C. EX. & ST., PUNE-III

VODAFONE ESSAR CELLULAR LTD. Versus COMMR. OF C. EX. & ST., PUNE-III - 2013 (30) S.T.R. 81 (Tri. - Mumbai) Issues Involved:1. Excess availment of CENVAT credit on input services without actual payment.2. Delayed and short payment of service tax without discharging interest liability.3. Removal of capital goods without reversing CENVAT credit.4. Invocation of the extended period of time for demand.5. Liability to pay interest on wrongly availed CENVAT credit.6. Financial hardship and pre-deposit requirements for interim stay.Issue-wise Detailed Analysis:1. Excess Availment of CENVAT Credit:The appellant, M/s. Vodafone Essar Cellular Ltd., availed CENVAT credit on input services based on billed amounts rather than actual payments, resulting in excess credit of Rs. 2,30,06,772/- by March 31, 2008. This action violated Rule 4(7) of the CENVAT Credit Rules, 2004. Upon audit detection, the appellant reversed the excess credit.2. Delayed and Short Payment of Service Tax:The appellant discharged service tax liability through the CENVAT credit account after the due dates and short-paid service tax in several instances. Interest liability under Section 75 of the Finance Act, 1994, amounting to Rs. 1,78,02,813/- for delayed payments and Rs. 27,43,686/- for short payments was not discharged. The short-paid service tax of Rs. 1,00,54,774/- was later paid upon audit detection.3. Removal of Capital Goods:The appellant removed capital goods on which CENVAT credit had been availed without following the prescribed procedure and without reversing the credit, resulting in wrong credit of Rs. 53,85,476/-. This amount was later paid, but the interest liability of Rs. 5,16,731/- for late payment was not discharged.4. Invocation of Extended Period:A show cause notice was issued on October 22, 2009, and the demands were confirmed with interest and a penalty of Rs. 1,54,40,250/- under Section 78 of the Finance Act, 1994. The appellant challenged the invocation of the extended period, arguing no intent to evade tax and rectification of mistakes upon detection.5. Liability to Pay Interest on Wrongly Availed CENVAT Credit:The appellant argued that interest on wrongly availed CENVAT credit was not payable as the credit was not utilized and remained in the books. They relied on judgments from various High Courts. However, the Tribunal distinguished these cases, noting that the credit was taken on a billed basis over several years, and the liability to pay duty arose multiple times.The Tribunal referred to the Apex Court's decision in Ind-Swift Laboratories, which held that interest liability arises when credit is wrongly taken, regardless of utilization. Rule 14 of the CENVAT Credit Rules mandates recovery of wrongly taken or utilized credit with interest.6. Financial Hardship and Pre-deposit Requirements:The appellant did not plead financial hardship or provide evidence of it. The Tribunal emphasized that interim stay considerations include prima facie case, balance of convenience, and irreparable loss. Without evidence of financial hardship, the Tribunal directed the appellant to pre-deposit 50% of the adjudged interest amount within eight weeks, with compliance to be reported on December 31, 2012. Upon compliance, the remaining interest and penalty recovery would be stayed during the appeal's pendency.Conclusion:The Tribunal found no prima facie case for complete waiver of pre-deposit, emphasizing statutory compliance and the importance of safeguarding public revenue. The appellant was directed to pre-deposit 50% of the interest amount, with further proceedings contingent on this compliance.