Tribunal allows appeal due to unjust denial of Cenvat credit

The Tribunal found that the denial of Cenvat credit was unjustified as the appellant had paid the tax, interest, and penalty without a show cause notice or adjudication order on non-payment of service tax, indicating no suppression of facts. The absence of a show cause notice invoking Section 73(1) proviso and the department's request for penalty under Section 76 rather than Section 78 further supported this finding. Consequently, the Tribunal held that Rule 9(1)(bb) could not be invoked, setting aside the impugned order and allowing the appeal.

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Issues: Denial of Cenvat credit under Rule 9(1)(bb) for alleged suppression of facts in non-payment of service tax under reverse charge basis.

In this case, the appellant was alleged to have not paid service tax on certain services, which was later pointed out by the Preventive Officer during a factory visit. The appellant then paid the service tax, interest, and penalty under Section 76, and the case was closed without a show cause notice being issued. However, a show cause notice was later issued to deny Cenvat credit under Rule 9(1)(bb) due to alleged suppression of facts. The appellant argued that since they paid the tax after inquiry and no SCN was issued, there was no suppression of facts. The appellant also contended that the demand was time-barred as the credit was availed before the SCN was issued. The Revenue reiterated the findings of the impugned order.

Upon hearing both sides, the Tribunal found that the denial of credit was solely based on invoking Rule 9(1)(bb). The Tribunal noted that the appellant had paid the tax, interest, and penalty without any SCN or adjudication order on non-payment of service tax, leading to the closure of the proceedings. It was emphasized that the absence of an SCN indicated no suppression of facts. The Tribunal highlighted that if there was indeed suppression, the department should have issued an SCN invoking Section 73(1) proviso, which was not done. Additionally, the department had asked for penalty under Section 76, not Section 78 for suppression of facts, further indicating no suppression. Consequently, the Tribunal held that Rule 9(1)(bb) could not be invoked, and the denial of Cenvat credit was deemed untenable. As a result, the impugned order was set aside, and the appeal was allowed.

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