2014 (5) TMI 580 - AT - Service Tax

Tribunal upholds recovery demand on main appellant but sets aside penalty on individual appellant

The Tribunal upheld the demand for recovery of wrongly availed Cenvat Credit and penalties on the main appellant, dismissing their appeal. However, the ... Cenvat Credit of Service Tax - duty paying document - input services - Security Service - service provider had not deposited the Service Tax in the treasury of Govt of India. - bona fide belief - Penalty - Held that:- After the whereabouts of service provider and if it was found that they had not paid the tax, appellant would have reversed the credit in which case they would not be liable to penal action at all. The fact that appellant did not make any efforts to locate the service provider nor did they make any effort to intimate the department nor did they debit the amount of credit taken goes against the appellants and therefore it has to be held that the invocation of extended time limit for demand in this case is sustainable. - Decision in the case of Lacto Cosmetics (Vapi) Pvt Ltd., vs, CCE., Daman [2012 (12) TMI 642 - CESTAT AHMEDABAD ] followed. - Demand confirmed with penalty - Decided against the assessee. Levy of personal penalty on employee - Held that:- individual will not benefit in any way by availing cenvat credit by the company and the ratio of M/s Lacto Cosmetics (Vapi) Pvt. Ltd., will apply, in the case of M/s Lacto Cosmetics (Vapi) Pvt. Ltd., Bench has set aside the penalties imposed on the employee. Issues:1. Availment of Cenvat Credit by the main appellant for Service Tax paid by the Security Service provider.2. Discrepancy in payment of Service Tax by the Security Service provider.3. Imposition of penalties on the main appellant and the employee.4. Applicability of the extended period for demand.Analysis:Issue 1: Availment of Cenvat CreditThe main appellant availed Cenvat Credit for Service Tax paid by the Security Service provider. However, it was discovered that the provider had not remitted the Service Tax to the government, leading to a demand for recovery of wrongly availed credit. The appellant contended they were unaware of the non-payment and believed the provider had fulfilled their tax obligations. The appellant's argument relied on previous decisions to support their case.Issue 2: Discrepancy in Service Tax PaymentThe Department argued that the appellant must ensure the discharge of Service Tax liability by the service provider to claim Cenvat Credit. It was highlighted that the service provider did not pay the Service Tax, as evidenced by an FIR lodged by the appellant. Reference was made to a previous case involving the same service provider to establish the appellant's awareness of the provider's non-compliance.Issue 3: Imposition of PenaltiesThe Adjudicating Authority confirmed the demands raised, imposed penalties, and upheld the decision on appeal, albeit reducing the penalty on the individual appellant. The appellant argued they took action upon discovering the non-payment, including filing an FIR against the service provider. The Tribunal considered the appellant's lack of effort to verify the provider's compliance and concluded in favor of the Revenue, upholding the penalties on the main appellant.Issue 4: Applicability of Extended PeriodThe Tribunal found the issue identical to a previous case involving the same service provider, where the appellant's failure to verify the provider's compliance led to penalties. Consequently, the Tribunal rejected the main appellant's appeal and set aside the penalty imposed on the individual appellant, following the precedent set in the previous case.In conclusion, the Tribunal upheld the demand for recovery of wrongly availed Cenvat Credit, penalties on the main appellant, and dismissed the main appellant's appeal while setting aside the penalty on the individual appellant. The decision was based on the appellant's failure to ensure the service provider's compliance with Service Tax obligations, as established in a previous case involving the same service provider.