2015 (10) TMI 2100 - AT - Service Tax

Tribunal overturns penalty on service tax, upholds credit denial for construction services

M/s. Shree Khedut Sahakari Khand Udyog Mandli Limited Versus Commissioner of Central Excise & S.T., Surat

The tribunal ruled in favor of the appellant regarding the denial of CENVAT credit on sales commission based on limitation grounds, setting aside the ... Denial of CENVAT Credit - Sales Commission - Bar of limitation - Held that:- the demand of service tax of Commission Agent is required to be upheld on merit, but, it is not sustainable for the extended period of limitation. Regarding the demand of service tax on construction service for Residential Colony and Decoration charges, the appellant immediately reversed the credit as pointed out by the audit.There is no material available on record, the malafide of the appellant. The Tribunal in the case of CCE, Allahabad vs. Kisan Sahkari Chini Mills Limited - [2008 (4) TMI 607 - CESTAT, NEW DELHI ], on the identical situation, set-aside the penalty. In the present case, the penalty is imposed under Section 11AC of the Central Excise Act, which cannot be sustained in the facts and circumstances of the case, as there is no suppression of fact with intent to evade payment of tax. - denial of CENVAT credit alongwith interest and penalty is set-aside on limitation - Decided in favour of assessee. Issues Involved:1. Denial of CENVAT credit on sales commission based on limitation.2. Contesting imposition of penalty on the balance amount of service tax for construction service.3. Applicability of penalty under Section 11AC of the Central Excise Act for the construction service tax demand.Analysis:1. The appellant contested the denial of CENVAT credit amounting to Rs. 44,476/- on sales commission solely on the grounds of limitation. The advocate argued that the demand for service tax was raised for the period April 2006 to March 2007. Referring to previous tribunal decisions, the advocate emphasized the limitation aspect and the inapplicability of the demand for an extended period. The tribunal acknowledged the merit of the service tax demand but ruled it unsustainable beyond the limitation period, ultimately setting aside the denial of CENVAT credit on limitation grounds.2. Concerning the demand of Rs. 2,74,868/- for construction service related to Residential Colony and Decoration charges, the appellant promptly reversed the credit upon audit observation. The tribunal noted the absence of evidence indicating malafide intent on the appellant's part. Citing a precedent case, the tribunal highlighted that penalty under Section 11AC of the Central Excise Act was not justified in the absence of deliberate suppression of facts to evade tax payment. Consequently, the penalty imposed was deemed unsustainable given the circumstances of the case.3. The final decision encompassed the denial of CENVAT credit amounting to Rs. 44,476/- along with interest and penalty being set aside based on limitation grounds. Conversely, the denial of CENVAT credit of Rs. 2,74,868/- along with interest was upheld. Notably, the penalty imposed was set aside due to the lack of intent to evade tax payment. The tribunal disposed of the appellant's appeal in accordance with the above determinations, providing a comprehensive resolution to the issues raised in the case.