No penalty u/s 78 when discharged the service tax and incorrectly utilized the same: CESTAT [Read Order]

penalty - service - tax - CESTAT - TAXSCAN

The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that no penalty under section 78 of the Finance Act, 1994 when discharged the service tax and incorrectly utilized the same.

Aswani Industries Pvt ltd, the appellant discharged the service tax liability under the reverse charge mechanism on  13.07.2017 vide challanin the month of  June 2017. The appellant has claimed cenvat credit shown in thereturn of June 2017 and the same was utilized for payment of duty in the month of June 2017.

The department stated that since the appellant paidthe service tax on the reverse charge mechanism on 13.07.2017, the same wasnotavailableascenvat creditas of 30.06.2017. Therefore the said credit could not have been adjusted towards the payment of duty for the month of June 2017. The Adjudicating Authority confirmed the demand forcenvat credit along with the demand for interest and equal penalty.

It was contended that the appellant has discharged the service tax under the reverse charge mechanismin respect ofthe services received in the month of June 2017 and paymentofservice taxwasmade on 13.07.2017.  The appellant has filed the ST-3 return for the period ending on 30.06.2017 on 10.07.2017. The appellant has reflectedthe cenvat creditof service taxpaid on 13.07.2017  of the saidreturnon 30.06.2017.

Since the service tax was paid on 13.07.2017 by no stretch of the imagination the same could have been mentioned in the ST- 3 return filedon 10.07.2017. Moreover, even the circularissued in this regard applies to only those cases where the service taxwas paidby the 05th /06th   of  July, 2017   or at the most the same is paid before filing the return. In the case of the service tax payment made after filing the return, the assessee was supposed to file a revised return incorporating thecenvat creditpaid of service tax on RCM which the appellant hasfailed to do.

A Coram comprised of Mr Ramesh Nair, Member (Judicial)held that since there is no intention of the appellant to evade any duty as the appellant have discharged the service tax and utilized the same though incorrectly butit was a revenue-neutral situation as the appellantis otherwise entitled to there fund of the same amount. The Tribunal held that in absence of any mala fide penalty under section 78 is not imposable and set aside the penalty. 

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