Tribunal rules in favor of appellants, directs interest payment, reduces penalties. Compliance with Cenvat Credit Rules emphasized.

The Tribunal ruled that no demand for service tax was sustainable against the appellants as they eventually paid the invoices. However, they were directed to pay interest for the intervening period and reduced the penalty to Rs. 2000 in each appeal. The appeals were disposed of, emphasizing compliance with Rule 4(7) of the Cenvat Credit Rules, 2004, regarding availing Cenvat credit on input services after payment of invoices.

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Issues:
Violation of Rule 4(7) of Cenvat Credit Rules, 2004 - Availing Cenvat credit on input services before payment.

Analysis:

1. Facts and Background: The appellants availed Cenvat credit on input services before making payments, leading to the issuance of show cause notices demanding Cenvat credit amounts and penalties for the period April 2007 to March 2009.

2. Appellants' Arguments: The appellants argued that they did not utilize the credit and that the final product was cleared on payment of duty, citing judgments from various High Courts and the Supreme Court to support their case.

3. Revenue's Arguments: The Revenue contended that the appellants did not reverse the credit before utilization, distinguishing the case from precedents where no interest was liable. They relied on a Supreme Court decision interpreting 'taken' or 'utilized wrongly' in favor of the Revenue.

4. Judgment: The Tribunal analyzed Rule 4(7) of Cenvat Credit Rules, 2004, which requires payment of the invoice before availing Cenvat credit. As the appellants paid the invoices later, they were held liable to pay interest for the intervening period and a penalty of Rs. 2000 in each case for contravening the rule.

5. Decision: The Tribunal ruled that no demand for service tax was sustainable against the appellants as they eventually paid the invoices. However, they were directed to pay interest for the intervening period and reduced the penalty to Rs. 2000 in each appeal.

6. Conclusion: The appeals were disposed of with the above decisions, emphasizing compliance with Rule 4(7) of the Cenvat Credit Rules, 2004, regarding availing Cenvat credit on input services after payment of invoices.

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