Appellate Tribunal rules no penalty under section 11AC for wrongly availing credit on employee contribution

The Appellate Tribunal CESTAT Ahmedabad ruled that the appellant was not liable for penalty under section 11AC for wrongly availing credit on the contribution of an employee recovered against the service of a rent a cab operator. The Tribunal found that there was no intention to avail the credit wrongly, as clarified by a previous decision of the Hon'ble Bombay High Court. Since there was no suppression of facts or intent to evade duty, the penalty under section 11AC was deemed inapplicable, leading to the Tribunal setting aside the penalty and allowing the appeal in that regard.

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Issues: Liability to penalty under section 11AC for wrong availment of credit on the contribution of employee recovered against the service of rent a cab operator service.

Analysis:
The judgment by the Appellate Tribunal CESTAT Ahmedabad involved the issue of whether the appellant is liable to penalty under section 11AC for wrongly availing credit on the contribution of an employee recovered against the service of a rent a cab operator. The appellant did not contest the disallowance of credit and the interest already paid. The appellant argued that there was no intention to avail the credit wrongly, citing a decision by the Hon'ble Bombay High Court in a previous case. The Revenue, represented by the Superintendent, contended that once the demand is confirmed invoking a specific provision, the penalty under section 11AC becomes mandatory, as per previous judgments by the Hon'ble Supreme Court. The Tribunal considered both sides' submissions and found that the penalty was imposed for wrong credit availment under section 11AC, which can only be imposed when the demand is confirmed invoking a specific provision. The appellant's argument was based on the lack of ingredients for invoking the specific provision. The Tribunal agreed with the appellant's submission that there was an interpretation issue regarding the credit attributable to the contribution of an input service, which was later clarified by the Hon'ble Bombay High Court. Since there was no suppression of facts or intent to evade duty, the Tribunal concluded that the penalty under section 11AC could not be invoked. Consequently, the Tribunal set aside the penalty and allowed the appeal to that extent.

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