2018 (10) TMI 1779 - AT - Service Tax

Tribunal rules in favor of appellant, overturns interest and penalty demands citing sufficient CENVAT account balance.

Kyal Trading Pvt. Ltd. Versus Commissioner of Service Tax, Mumbai V

The Tribunal set aside the interest and penalty demands against the appellant, ruling in favor of the appellant due to the presence of sufficient balance ... Levy of Interest and penalty - CENVAT Credit - common input service for providing both taxable as well as for the purpose of trading activities - appellant submits that interest and penalty demand cannot be demanded on the appellant on the ground that the appellant had sufficient balance in its Cenvat account during the period between taking of CENVAT Credit and subsequent reversal thereof - HELD THAT:- The department has not specifically alleged that the appellant had not maintained sufficient balance in its Cenvat account between the period of taking irregular Cenvat credit and subsequent reversal thereof. Taking of credit in the CENVAT account under such circumstances would be considered as a mere book entry inasmuch as there is no loss of revenue to the Government exchequer. Hence, it is not the case of Revenue that they have suffered loss owing to delayed reversal of Cenvat credit, which should be compensated by way of payment of interest. The law with regard to levy of interest on delayed reversal of CENVAT Credit is no more res integra in view of the judgementof Hon’ble Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX LARGE TAXPAYER UNIT, BANGALORE VERSUS M/S BILL FORGE PVT LTD, BANGALORE [2011 (4) TMI 969 - KARNATAKA HIGH COURT], where it was held that once the entry was reversed, it is as if that the Cenvat credit was not available. Interest and penalty is not leviable - appeal allowed - decided in favor of appellant. Issues Involved:1. Demand for interest and penalty on the appellant for availing CENVAT Credit.2. Invocation of Section 78 of the Act for imposition of penalty.3. Allegation of maintaining sufficient balance in CENVAT account.4. Interpretation of law regarding levy of interest on delayed reversal of CENVAT Credit.5. Applicability of previous judgments in similar cases.Analysis:1. The appellant availed common input service for both taxable and trading activities, objected by the Audit Wing, leading to reversal of CENVAT Credit. The department initiated show cause proceedings seeking confirmation of CENVAT demand, interest, and penalty. The Commissioner (Appeals) upheld the demand, prompting the appeal before the Tribunal.2. The appellant's counsel argued against the interest and penalty demand, citing sufficient balance in the CENVAT account during the disputed period and absence of malafide intention. Reference was made to a Tribunal decision in Nova Petrochemicals Ltd. case. The Revenue representative reiterated the findings of the impugned order.3. The Tribunal noted that the department did not allege insufficient balance in the CENVAT account between availing and reversing the credit. The Tribunal considered the credit under such circumstances as a mere book entry without loss to the revenue. Citing the judgment of the Karnataka High Court in Commissioner v. Bill Forge Pvt. Ltd., the Tribunal found no merit in the interest and penalty demands.4. The Tribunal referenced the Nova Petrochemicals Ltd. case, where interest and penalty demands were set aside based on the findings that the appellant had noticed the irregularity and reversed the credit. The Tribunal held that the demand for the extended period of limitation was not sustainable, especially since the appellant had already paid the disputed duty.5. Based on the legal position and precedents, the Tribunal concluded that there were no merits in upholding the interest and penalty demands against the appellant. Therefore, the impugned order confirming the demands was set aside, and the appeal was allowed in favor of the appellant.This detailed analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the ultimate decision reached by the Tribunal in favor of the appellant.