National Institute Of Fashion Design vs C.C.E., Chandigarh

Customs Excise and Service Tax Appellate Tribunal19 January 2015

CitationAppeal No. ST/382/2009-CU (DB)

Ratio decidendi

The rule this decision rests on

Where an assessee has paid the service tax and interest voluntarily once the revenue authorities point out the default, and the default arises from confusion caused by frequent issue, withdrawal and reissue of exemption notifications, with no mens rea or deliberate avoidance established by the Revenue, penalties under the relevant provisions are not imposable and are harsh and unwarranted. A restriction on utilisation of Cenvat credit to 20% of the service tax payable on taxable output service does not extinguish the unutilised balance, which remains as credit in the assessee's account; hence exceeding the utilisation limit, once the excess is paid with interest on being pointed out, does not attract penalty in the absence of mens rea.

Written by Miss Lucy from the judgment below, not taken from a headnote.

Judgment

As delivered

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066CIRCUIT BENCH AT CHANDIGARHAppeal No. ST/382/2009-CU (DB)

(Arising out of OIA No.131/CE/CHD/2009 dt.12.3.2009 passed by Commissioner of Central Excise (Appeals) Chandigarh)

National Institute of Fashion Design Appellants

Vs.

C.C.E., Chandigarh Respondent

Appearance:

Present for the Appellant: Shri Gagan Kohli, Advocate

Present for the Respondent: Shri V.P.Batra, AR

Honble Mr.P.K.Das, Member (Judicial)

Honble Mr.P.S.Pruthi, Member (Technical)

Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

seen

4. Whether order is to be circulated to the Department Authorities?

Yes

Coram: Honble Mr. P.K.Das, Member (Judicial)

Honble Mr.P.S.Pruthi, Member(Technical)

Date of Hearing/decision: 19.01.2015

FINAL ORDER NO.50195/2015

PER: P.S.PRUTHI

The appellant are in appeal against the Order-in-Appeal in which the demand of duty on vocational coaching service and on excess utilization of input service credit beyond the limit of 20-% of service tax payable on output service, was demanded. Penalties were also imposed under sections 76, 78 and under Rule 15(4) of Cenvat Credit Rules, 2004.

2. The facts of the case are that the appellant were exempt from levy of service tax on vocational coaching service prior to 1.7.2004 and post 9.9.2004. Government omitted to extend exemption during the period 30.6.2004 to 9.9.2004. The appellant did not pay service tax during this period. Next issue is that the appellant while providing exempted taxable service, were entitled to use cenvat credit only to the extent of amount not exceeding 20% of the amount of service tax payable on taxable output service in terms of Rule 2(l) of Cenvat Credit Rules, 2004 which they did not follow and therefore demand of service tax was raised. Penalties were imposed under sections 76, 78 and under Rule 15(4) of Cenvat Credit Rules, 2004.

3. Heard both sides.

4. Learned AR relied on the Honble Karnataka High Courts judgement in the case of CCE, Bangalore vs. Geneva Fine Punch Enclosures Ltd.-2011 (267) ELT 481 (Kar) and in the case of CCE & SR, Bangalore vs. Adecco Flexione Workforce Solutions Ltd.-2012 (26) STR 3 (Kar). In justification of his stand, that once service tax and interest has been paid before issue of show cause notice when pointed out by the revenue authority, penalties are not imposable.

5. Considered the submissions of both the sides. As regards first issue, we do find that omission by the government to exempt vocational coaching service for the period 1.7.2004 to 9.9.2004 could have lead to confusion in the mind of tax payers. When the notifications are frequently issued sometimes exempting services, then withdrawing exemption and then again issuing exemption, the assessees are not able to follow the notifications due to confusion. We find that no mens-rea or deliberate act of avoidance of payment of service tax has been established by the Revenue. As far as second issue of availability of excess cenvat credit is concerned, We find that the appellant voluntarily paid tax alongwith interest when being pointed out by the authorities. Here again, mens-rea does not get established. We also note that the condition of utilization of service tax to the extent of 20% did not prevent the assessee from having cenvat credit in their account; it only debarred them from utilizing the same to an extent exceeding 20%. In other words, as held in the various decisions, remaining cenvat credit would not have lapsed, it would have remained as credit in the account. Therefore once duty has been paid by the appellants, imposition of penalties is harsh and not warranted. Reliance is placed on the judgement in the case of the case of CCE, Bangalore vs. Geneva Fine Punch Enclosures Ltd. (supra) and in the case of CCE & SR, Bangalore vs. Adecco Flexione Workforce Solutions Ltd. (supra).

6. In view of above, appeal is allowed and the impugned order is set aside.

(Pronounced in the court)

(P.S.PRUTHI) (P.K.DAS)

MEMBER (TECHNICAL) MEMBER(JUDICIAL)

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