The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the service tax penalty was unjustified and without jurisdiction due to time-barred proceedings.
The appellant has been registered for service tax under “Construction of Complex Services.” The appellant availed of the benefits of Notification No. 26/2012 for construction services. The appellant paid a mobilization advance of Rs. 15.618 crore (including Rs.0.618 crore in service tax) to M/s Ajnara Infrastructure Pvt. Ltd. and M/s Straight Edge Contracts Pvt. Ltd. The appellant adjusted part of these advances against invoices issued after July 2012 and claimed service tax credit on the mobilization advance.
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A show cause notice (SCN) dated 19.10.2015 was issued to the appellant after the audit for the period 2012-13 to 2014-15 was carried out. A reply was filed by the appellant denying all the allegations made in the SCN.
Later on through the order dated 23.03.2017, the commissioner confirmed the demand of Rs. 91,01,452/- along with interest and penalty. The appellant, who was aggrieved by the above order approached CESTAT for relief.
It was submitted by the appellant that the impugned service was subjected to to litigation from 2010 to 2017. Thus, the extended period of limitation cannot be invoked due to the prevailing confusion in both the industry and judiciary during the impugned period.
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The CESTAT bench observed that since there was no service tax liability on the mobilization advances, the credit taken on the tax paid was not permissible.
The bench noted that from 01.07.2012, Rule 14 of the Cenvat Credit Rules, 2004 was amended to include the phrase “taken and utilized wrongly.” In this case, covering the periods 2012-13 and 2013-14, the appellant’s closing Cenvat Credit balance as of 01.04.2013 exceeded Rs. 91,01,452.
The bench further observed that, since the appellant had filed returns regularly, had cooperated with the department, and had submitted all information and documents during the audit, the intention to evade has to be a positive act to be established by the department.
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The bench, comprising Binu Tamta and Hemambika R. Priya, held that there was no justification for invoking the extended period to impose a penalty under Section 78 or for imposing a penalty under Section 77 of the Finance Act.
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