The Customs, Excise & Service Tax Appellate Tribunal Bangalore, found that erroneous availment of Cenvat credit under Rule 3(5) of the Cenvat Credit Rules, 2004 could be recoverable only after insertion of the recovery provision to the said Rule by insertion of an Explanation through amending Notification.
The bench observed that in the event, the assessee pays service tax in respect of a taxable service which is not paid by either wholly or partially for any reason, he may adjust the service tax so paid by him against the service tax liability for the subsequent period. Therefore, it is clear that the assessee is allowed to adjust service tax excess paid against the service tax liability for the subsequent period. Whereas in the present case, the appellant had erroneously availed cenvat credit of Rs.2,03,69,972/- and sought to adjust against service tax paid on export of services previously which cannot be considered as an adjustment of service tax relating to service tax liability for the subsequent period.
The bench found that the recovery of the said Cenvat credit by the Commissioner is erroneous.
Facts
The appellant are engaged in providing taxable service viz. ‘Business Support Services’, ‘Maintenance or Repair Services’ and ‘Commercial Coaching and Training Services’ etc. during the relevant period. On the basis of the Central Excise Revenue Audit on scrutiny of their records, it revealed that they had availed inadmissible cenvat credit amounting to Rs.2,03,69,372/- during the period from September 2004 to November, 2006 on inputs which were not used in providing the output services but were removed from the registered premises “as such” for the purpose of trading activity.
The amount equivalent to the cenvat credit availed on such goods being not admissible, later they have voluntarily reversed the cenvat credit availed during the March 2007 by taking recourse to Rule 6(3) of the Service Tax Rules, 1994 by adjusting erroneously paid service tax to the extent of Rs.2,89,78,046/- on output services which were exported in terms of Rule 6(3) of Service Tax Rules, 1994.
Consequently, a show-cause notice was issued to them for recovery of the said cenvat credit amount along with interest and penalty.
On adjudication, the demand was confirmed with interest and penalty.
Submissions
Advocate for the appellant has submitted that it is an undisputed fact that they had erroneously paid service tax on services exported to overseas clients amounting to Rs.2,89,78,046/- which the Department has accepted as refundable under Section 11B of the Central Excise Act, 1944.
He submitted that it is a settled law that where excess duty / tax has been paid, the same should be adjusted against short-payment in respect of other taxable events.
Conclusion
The tribunal observed that the Department was aware of the adjustment of the inadmissible cenvat credit against the excess service tax paid since February 2007 as communications have been exchanged between the appellant and Department resulting to payment of interest in March, 2009; and the showcause notice was issued on 15.06.2009 i.e. after two years; thus invocation of extended period of limitation alleging suppression of fact cannot be sustained.
The bench set aside the order and allowed the appeal.
Case Details
Case Name: M/s. Hewlett Packard India Sales Pvt. Ltd. v/s The Commissioner of Service Tax, LTU
Citation: Service Tax Appeal No. 1681 of 2010
Tribunal: CESTAT Bangalore
Coram: Dr. D.M. Misra, Member (Judicial) and Mrs R Bhagya Devi, Member (Technical)
