2018 (8) TMI 1819 - AT - Service Tax

Tribunal dismisses Revenue's penalty appeal, highlights need for proof of fraud

CCE & S.T., Pune I Versus M/s Aamby Valley Ltd.

The Tribunal upheld the Commissioner's decision and dismissed the Revenue's appeal, ruling against imposing a penalty on the appellant. The Tribunal found ... Waiver of penalty imposed u/r 15(3) of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 - irregular availment of CENVAT Credit was noticed by the audit wing of the department, which was later on reversed - Intent to evade or not - HELD THAT:- It transpires from the available records that the appellant had sufficient balance in its Cenvat account during the period between taking of irregular CENVAT Credit and subsequent reversal thereof. Thus, it cannot be said that the appellant had taken irregular CENVAT Credit by the reason of fraud, collusion, willful mis-statement etc, with intent to defraud the Government’s revenue. The ingredients of Rule 15 (3) of the rules read with Section 78 of the Act are absent in this case for imposition of penalty on the appellant - appeal dismissed - decided against Revenue. Issues:- Appeal against the penalty imposed under Rule 15(3) of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994.Analysis:The judgment in question revolves around an appeal made by the Revenue against an order passed by the Commissioner of Central Tax (Appeals), Pune I, regarding the imposition of a penalty under Rule 15(3) of the Cenvat Credit Rules, 2004, in conjunction with Section 78 of the Finance Act, 1994. The Revenue contended that the penalty was justified due to the respondent's failure to pay the service tax amount within the stipulated time frame, which was rectified only after an objection was raised by the Audit Wing of the department. The Revenue argued that the irregular availment of CENVAT Credit, subsequently reversed by the appellant, indicated an intention to defraud the Government revenue, justifying the imposition of the penalty by the original authority.Upon hearing both sides and examining the records, the Tribunal observed that the appellant had maintained a sufficient balance in its Cenvat account throughout the period when the irregular CENVAT Credit was taken and subsequently reversed. This led the Tribunal to conclude that there was no evidence to suggest that the appellant had engaged in fraudulent activities, collusion, willful misstatement, or any intent to defraud the Government's revenue. Consequently, the Tribunal found that the essential elements required under Rule 15(3) of the rules read with Section 78 of the Act were absent in this case, thereby ruling against the imposition of a penalty on the appellant.In light of the above analysis, the Tribunal upheld the impugned order passed by the learned Commissioner (Appeals) and dismissed the appeal filed by the Revenue. The judgment highlights the importance of establishing the presence of specific elements such as fraud or intent to defraud the Government's revenue when imposing penalties under relevant legal provisions, emphasizing the need for a thorough examination of the facts and circumstances surrounding each case before penal actions are taken.