The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that interest not payable for intervening period when sufficient balance is maintained in CENVAT Credit Account.
TIL Limited, the appellant or assessee is in the business of providing ‘management, maintenance, and repair services’ to their clients. During the impugned period, the appellant received various input services in relation to providing their taxable services and availed CENVAT credit of the service tax paid on such services.
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One of the appellant’s input service providers, raised multiple invoices during the financial year 2008–09. In an invoice, they charged an amount of Rs. 12,00,000 as professional fees and Rs. 1,80,000 as out-of-pocket expenses, and accordingly, service tax was calculated at a rate of 12.36%, which works out to Rs. 1,70,568.
While recording in the computer system, the appellant took the CENVAT credit by adding Rs. 1,80,000 inadvertently to their CENVAT credit account. In the month of September 2009, a CERA audit was conducted and a spot memo was issued to the appellant, finding that the appellant had taken excess credit of Rs. 1,80,000. Upon realizing that they had taken inadvertent credit, the appellant reversed the credit that was lying unutilized in their CENVAT credit account.
The proceedings were initiated against the appellant to demand interest for the intervening period and to impose penalties under the Finance Act, 1994. The matter was adjudicated, and the demand for interest was confirmed along with a penalty of Rs. 3,00,000 under Section 78 of the Finance Act, 1994.The appellant challenged the order before the Commissioner (Appeals), who has rejected the appeal.
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The two member bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the appellant had sufficient balance in their CENVAT credit account during the intervening period when they had taken the excess credit.
While allowing the appeal, the Tribunal held that since no demand is confirmed against the appellant, penalty is not imposable on the appellant.
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