2018 (9) TMI 1725 - AT - Service Tax

Bank wins appeal on CENVAT credit irregularity & penalties. Interest upheld, penalties dropped.

CORPORATION BANK Versus C.C.E. & S.T. -MANGALORE

The Tribunal allowed the appeal by a nationalized bank challenging the irregular availment of CENVAT credit and penalties under Sections 76, 77, and 78 of ... CENVAT Credit - extended period of limitation - Rule 9(9) of CCR, 2004 - SCN was issue for irregular availment of CENVAT credit by invoking the extended period and proposing to levy penalties under Sections 76, 77 & 78. Held that:- The Commissioner in the impugned order has found that the bank acted bona fidely as it was first year of Service Tax implementation and has taken a lenient view by not imposing penalties by invoking the provisions of Section 80 - further, once the Commissioner has found the conduct of the appellant bona fide and there was a reasonable cause for the act of the appellant, then extended period of limitation cannot be invoked. In the present case, the period involved is from 10/09/2004 to 31/03/2005 whereas show-cause notice was issued on 12/07/2006 which is beyond the normal period of one year as prescribed under law - it is also found that the appellant is a Government of India enterprise and therefore the allegation of suppression cannot be made. Appeal allowed - decided in favor of appellant. Issues:1. Irregular availment of CENVAT credit by the appellant.2. Allegations of not filing returns in time and availing credit on ineligible services.3. Commissioner's decision on penalties under Sections 76, 77, and 78 of the Finance Act.4. Applicability of extended period for demand and penalties.5. Bona fide conduct of the appellant and invocation of Section 80 of the Finance Act.6. Judicial decisions cited by the appellant in support of their arguments.Analysis:1. The appeal challenged the Commissioner's order holding the appellant irregularly availed CENVAT credit amounting to Rs. 1,76,50,606 and Rs. 1,13,41,155, along with interest under CENVAT Credit Rules and Section 11A of the Central Excise Act. The Commissioner demanded interest for delayed service tax payment but dropped penalties under Sections 76, 77, and 78 of the Finance Act, cautioning the appellant for future compliance.2. The appellant, a nationalized bank, faced allegations of irregular CENVAT credit availing and delayed filing of returns post the applicability of Service Tax provisions in 2004. The Revenue claimed the appellant availed credit on ineligible services, leading to a show-cause notice, which the bank responded to justifying the delays and credit availing. The Commissioner partially allowed the credit, considering the first-year challenges of Service Tax implementation and refrained from imposing penalties invoking Section 80.3. The appellant contended that the impugned order lacked legal merit, challenging the invocation of extended period for demand and penalties. Citing precedents, the appellant argued that penalties under Section 78 being waived precluded the extended period's applicability, emphasizing the absence of mala fide intent due to the bank's status as a Government enterprise.4. The Tribunal analyzed the appellant's conduct, finding their actions bona fide given the initial Service Tax implementation challenges. Considering the precedents cited, the Tribunal concluded that the extended period's invocation was unjustified, especially since the appellant's conduct was reasonable, and penalties were not imposed under Section 78.5. Citing various judicial decisions, the appellant's arguments centered on the absence of mala fide intent due to their status as a Government enterprise, thus challenging the extended period's applicability for demand and penalties. The Tribunal concurred, setting aside the impugned order and allowing the appeal based on the legal principles and precedents cited.6. The Tribunal's decision aligned with the cited judicial precedents, emphasizing the importance of bona fide conduct and reasonable cause in determining the applicability of penalties and extended periods for demand. The judgment highlighted the significance of Section 80 of the Finance Act in cases where there is no intent to evade payment, leading to the dismissal of the Commissioner's order based on the legal arguments presented.This detailed analysis of the judgment highlights the key issues, legal arguments, and the Tribunal's decision based on the facts and legal principles involved in the case.