2016 (11) TMI 279 - AT - Service Tax

Tribunal Waives Penalties, Allows Appeal: Appellant to Deposit Due Amount in Cash

M/s. Axis Private Equity Ltd. Versus Commissioner of Service Tax, Mumbai-I

M/s. Axis Private Equity Ltd. Versus Commissioner of Service Tax, Mumbai-I - TMI Issues:1. Service tax payment through Cenvat Credit for a previous period.2. Interpretation of Rule 3(4) of Cenvat Credit Rules, 2004.3. Applicability of precedents cited by the appellant.4. Liability for penalty under Sections 76 and 77 of the Finance Act.Issue 1: Service tax payment through Cenvat Credit for a previous periodThe appellant's appeal was against the rejection of their appeal by the Commissioner of Service Tax, upholding the Order-in-Original confirming a demand of Rs. 12,57,365, interest under Section 75, and penalties under Sections 76 and 77. The main contention was that the appellant paid the due amount through Cenvat Credit on later dates than when the amount was actually due, which was deemed impermissible under Rule 3(4) of the Cenvat Credit Rules, 2004.Issue 2: Interpretation of Rule 3(4) of Cenvat Credit Rules, 2004The Tribunal analyzed Rule 3(4) of the Cenvat Credit Rules, 2004, emphasizing that the proviso clearly states that the Cenvat Credit can only be utilized for payment of duty or tax relating to the month for which the credit is available on the last day of that month. In this case, the service tax due for November 2008 was paid from Cenvat Credit earned between November 2008 and January 2009, which was not in accordance with the rule.Issue 3: Applicability of precedents cited by the appellantThe appellant relied on various judgments to support their argument that the payment of service tax dues from Cenvat Credit for a previous period should not be objected to if interest is also paid for the delayed period. However, the Tribunal differentiated the facts of those cases from the present one, highlighting that the issue here was not related to current liability but to dues of a previous period, making the cited judgments inapplicable.Issue 4: Liability for penalty under Sections 76 and 77 of the Finance ActDespite finding that the appellant had paid the service tax from Cenvat Credit instead of cash, the Tribunal acknowledged that there was no intention of tax evasion. Considering the availability of Cenvat credit in the subsequent period, the Tribunal reduced the cash payment liability and waived the penalties under Sections 76 and 77 of the Finance Act, citing reasonable cause for the appellant's actions.In conclusion, the appeal was partly allowed, with the appellant required to deposit the due amount in cash while the same amount would be restored in their Cenvat account. The Tribunal recognized the appellant's payment of service tax and the absence of tax evasion intent, leading to the waiver of penalties under the Finance Act.*(Pronounced in court on 29/02/2016)*