2023 (8) TMI 848 - AT - Service Tax

Tribunal rules in favor of Appellant on Service Tax issue, allows appeal, sets aside demand.

M/s Anand Dewelling Pvt. Ltd. Versus Commr. of CGST & Central Excise, Patna

The Tribunal allowed the appeal in the case involving contravention of conditions under Notification No. 1/2006-ST by the Appellant, who had inadvertently ... Contravention of the condition imposed under the Notification No. 01/2006 - CENVAT Credit availed - demand along with interest and penalty denying the benefit of notification - HELD THAT:- Admittedly the fact of Cenvat Credit and utilization of the same has been recorded by the Appellant in their ST-3 Returns. Only on the basis of scrutiny of these Returns, the Department has issued the Show Cause Notice. Therefore, this proves that the Appellant has not suppressed any fact but has declared the details of Cenvat Credit taken and their utilization in the ST 3 Returns. Therefore, their explanation that this was an inadvertent error on their part, is to be accepted. It is also seen that after the OIO was passed, they have reversed the entire Cenvat Credit. In the present case, the Appellant has reversed the entire Cenvat Credit taken. Therefore, the confirmed demand of Rs.22,13,962/- along with interest is required to be set aside. However, as pointed out by the Learned AR, it is seen that the Appellant has only reversed the Cenvat Credit without paying the relevant interest - the Appellant is required to pay the interest for the period when the Cevat Credit was taken till the time they have reversed the Cenvat Credit, as per the applicable rate of interest at that particular point of time. Since the Appellant has contravened the conditions imposed under in the Notification, they cannot be absolved from penalty and they are also required to pay the penalty - thus they are required to pay penalty of Rs.1.25 lakhs. Appeal allowed in part. Issues involved: The issues involved in the judgment are regarding the Appellant's contravention of the conditions imposed under Notification No. 1/2006-ST, specifically related to taking Cenvat Credit while providing construction services and the subsequent demand of Service Tax without abatement.Summary:Issue 1: Contravention of conditions under Notification No. 1/2006-STThe Appellant, a provider of construction services, had taken Cenvat Credit while availing the benefit of exemption under Notification No. 1/2006-ST, which required payment of Service Tax on only 33% of the consideration without taking Cenvat Credit. The Department issued a Show Cause Notice demanding Service Tax on the entire consideration due to the Appellant's utilization of Cenvat Credit. The Adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading the Appellant to appeal before the Tribunal.Issue 2: Reversal of Cenvat CreditThe Appellant contended that the Cenvat Credit was inadvertently taken and was fully reversed after receiving the Order-in-Original. The Appellant relied on case laws to support their argument that the reversal of Cenvat Credit amounts to non-availment, seeking allowance of the appeal.Decision:Upon hearing both sides and examining the documents, the Tribunal noted that the Appellant had declared the Cenvat Credit and its utilization in their ST-3 Returns, indicating no suppression of facts. The Tribunal accepted the explanation that the utilization of Cenvat Credit was an inadvertent error, especially since the Appellant had reversed the entire credit. Citing relevant case laws, including the Supreme Court and Tribunal decisions, the Tribunal held that the reversal of Cenvat Credit equated to non-availment, thereby allowing the appeal. The confirmed demand was set aside, but the Appellant was directed to pay interest for the period until the reversal of Cenvat Credit and a penalty of Rs.1.25 lakhs for contravening the conditions of the Notification.Conclusion:The Tribunal partly allowed the appeal, setting aside the demand but requiring the Appellant to pay interest and penalty for contravening the conditions under Notification No. 1/2006-ST.