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Judgment
The present appeal is directed against the impugned order dt. 31/10/2019 passed by the Commissioner of Central Tax(Appeals), Bangalore whereby the penalty imposed on the appellant in the Order-in-Original has been upheld.
Briefly the facts of the present case are that the appellant are registered with the Department for providing services under the category of Information Technology Software Services. During the course of audit conducted on the records of the appellant covering the period from April 2011 to March 2015, it was observed that the appellant had wrongly availed service tax credit on services not used for providing output service as detailed in the table below:_
Period involved
CENVAT Credit availed on input
Amount
April 2014 to March 2015
Vending Machine, Pooja expenses, supply of plants, garden maintenance and parking fee
1,53,256/-
March 2015
Civil interior works and electrical works undertaken to their office building
17,78,385/-
April to June 2015
Civil interior works and electrical works of their office building
26,82,094/-
Total
46,14,735/-
During the audit itself, vide letter dt. 22/09/0215, appellant was asked to reverse the wrongly availed credit of Rs.46,14,735/- and the appellant vide letter dt. 14/10/2015 reversed the said amount and requested for waiver of penalty. Thereafter a show-cause notice dt. 15/12/2015 was issued to the appellant and the same was adjudicated vide Order-in-Original dt. 09/08/2018 confirming the demand which was already reversed and appropriated and imposed penalty of Rs.46,14,735/- under Section 78(1) of Finance Act, 1994. Aggrieved by the said order, appellant filed appeal before the Commissioner(Appeals) who rejected the said appeal. Hence the present appeal.
Heard both sides and perused the records.
Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. She further submitted that it is undisputed fact that the entire tax was paid before the issuance of the show-cause notice on being pointed out by the audit by reversing the cenvat credit and the same fact has been recorded in paras 3,4,14,17 and 20 of the impugned order. She further submitted that in the present appeal, only penalty under Section 78 has been challenged by the appellant and the said penalty was imposed only on the finding that "but for the audit of records by the Department, the issue relating to wrong availment of service tax credit on services not used for providing output service during the relevant period would have gone unnoticed." The learned counsel further submitted that during the audit itself, the appellant accepted the objection of the audit party and the cenvat credit on disputed services was duly reversed. She further submitted that Department was not able to bring any material on record showing that the appellant has suppressed the material with intent to evade the tax. She further submitted that the decision of this Tribunal in the case of YCH Logistics (India) Pvt. Ltd. Vs. CCE,Cus.&ST, Bangalore-I [2020(43) GSTL 518 (Tri. Bang.)] has dropped the penalty under Sections 77 and 78 on identical facts. She submitted that Hon'ble High Court of Karnataka in the case of CCE, Bengaluru Vs. Vilax Industrial Fabrics Survey [2018-TIOL-1363-HC-KAR-CX] has upheld the decision of the Tribunal dropping the penalty.
On the other hand, the learned AR reiterated the findings of the impugned order.
After considering the submissions of both sides and perusal of the material on record, I find that it is not disputed that the appellant reversed the cenvat credit on impugned services on being pointed out by the Department before the issuance of the show-cause notice. Further I find that the appellant has not utilized the said credit and had sufficient balance during the relevant period in their cenvat credit account which was reversed and the Department was informed vide its letter dt. 14/10/2015 regarding the reversal of the said credit. Further I find that the Division Bench of this Tribunal in the case of YCH Logistics (India) Pvt. Ltd. cited supra has considered the aspect of imposition of penalty under Section 78 and has dropped the penalty after considering the various decisions relied upon by the assessee. It is pertinent to reproduce para 5 of the said decision.
After considering the submissions by both the parties and perusal of the provisions of Sections 73, 77 and 78 of the Finance Act, 1994 and the various decisions relied upon by the appellant cited supra, we find that Section 73(3) is very clear as it says that if a tax is paid along with interest before the issuance of show cause notice, then in that case show cause notice shall not be issued. In the present case, we find that the contention of the appellant that they bonafidely believed that they are not liable to pay service tax but when the audit party raised the objection that they are liable to pay service tax, then they immediately paid the service tax along with interest which is admitted in the impugned order, is justified. Further except mere allegation of suppression, the Department did not bring any material to prove that there was suppression and concealment of facts to evade payment of tax. Consequently, in our considered view, the imposition of penalty under Section 77 & 78 is not justified and bad in law. Hence, we set aside the penalty imposed on the appellant by allowing the appeal of the appellant.
Further I find that the Hon'ble Karnataka High Court has also upheld the decision of the Tribunal dropping the penalty. By following the ratio of the said decisions, I am of the considered view that the imposition of penalty under Section 78 in the present case is not sustainable. Accordingly, I set aside the impugned order and allow the appeal of the appellant with consequential relief, if any.
(Operative portion of the Order was pronounced in Open Court on 06/04/2021)