CST Vs. STATE BANK OF INDIA

JUDGEMENT

(1.) HEARD both sides.

(2.) THE facts of the case are that the State Bank of India, (Leather & International Branch), Kilpauk, Chennai, is providing both taxable and exempted service. As such, under Rule 6(3)(c) of the Cenvat Credit Rules, 2004, they were entitled to utilize CENVAT credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on output services, since they were not maintaining separate accounts. During the month of February, 2005, they were required to pay service tax amounting to Rs. 6,56,651/ -. As such, they were entitled to utilize CENVAT credit amounting to Rs. 1,31,096/ - only whereas, in contravention of the rules they have utilized CENVAT credit amounting to Rs. 2,62,426/ -. It is the allegation of the department that the said branch of the SBI did not disclose to the department that they are providing exempted output service also and that they have taken service tax in excess of the admissible 20% amount. This was only detected when the accounts of the SBI were audited by the departmental audit officers. As such, the impugned show cause notice has been issued invoking the extended period of time limit. The impugned order in original upholds the demand apart from levying interest and penalty on the Respondents. The lower appellate authority has held that the demand was time barred, leading to this appeal by the department.

(3.) SHRI N.S. Sivakumar, CA, appearing for the Respondents states that the SBI has no intention to evade service tax. He explains that the Head Office of the SBI issued an internal Circular asking the branches to utilize CENVAT credit for the period October, 2004 to February, 2005, and accordingly, the branch has taken credit keeping in view 20% of the tax payable for the months of October, 2004 to February, 2005, since they have not been maintaining separate accounts. He however, states that he does not have a copy of the said circular. He cites the decision of the Hon'ble Supreme Court in the case of Pushpam Pharmaceuticals Co. v. Collector of Central Excise, Bombay : 1995 (78) ELT 401 (SC) which holds that the act of the Assessees must be deliberate to invoke longer period of limitation. He supports the impugned order passed by the lower appellate authority.