KANDLA EARTH MOVERS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) DURING the course of audit of the records of the appellants, it was found that the appellants had taken credit of additional duty of customs revisable under Sec. 3(5) of the Customs Tariff Act, 1985 and utilized the same for payment of service tax for output services. Availment of credit utilization happened in the year 2007 -08 and audit of the records was conducted in April, 2011. Thereafter show -cause notice was issued proposing recovery of the credit wrongly availed with interest and imposition of penalty. In the meantime, appellants paid service tax and interest. In the appeal, appellant is not contesting the liability of service tax and interest, but only contesting the imposition of penalty. The ld. Counsel on behalf of the appellants submits that in this case the appellants had paid service tax availed by them with interest on 6 -9 -2011 and on finding that there was some mistake in calculating the interest; they paid the balance amount in November, 2011. It is also his submission that service tax liability with interest had been discharged before receipt of show -cause notice and therefore the appellant is squarely covered by provisions of Sec. 73(3) of the Finance Act, 1994, which provides that in case the assessee pays full amount of tax with interest, no show cause notice shall be issued if there is no suppression or misdeclaration. He further submits that in this case, there was no intention to evade or avail wrong credit, but it was a bona fide mistake on the part of the clerk who was looking after the work. This submission is supported by the fact that before receipt of show -cause notice, appellants had paid service tax and interest and once such amount is paid, proper action is to be taken to check the correctness of the amount paid and inform them about the same for which period of one year as provided in the statutory provision. Therefore, as soon as they were informed, the Interest was paid and balance amount was also paid in November, 2011. He submits that in view of the facts, appellants paid the money without challenging the same even though the audit party had pointed out the availment of credit before more than one year and appellants could have challenged the demand on the ground of limitation, appellants did not want to challenge denial of credit on technical ground to avoid discharging the liability of service tax and therefore paid Cenvat credit of Rs. 2,09,475/ - with interest of Rs. 1,47,000/ -. He also submits that under these circumstances imposition of penalty is not called for and appellant's case is covered by Sec. 73 of the Finance Act, 1994.

(2.) THE ld. AR would submit that the appellants did not pay full amount before the issue of show -cause notice. The show -cause notice was issued on 2 -9 -2011 and therefore, penalty has to be upheld.

(3.) I have considered the submissions of both sides. On going through the records and considering the submissions, I find that audit was conducted in April, 2011; appellant paid Cenvat credit taken with interest on 6 -9 -2011; show -cause notice is dated 2 -9 -2011; show -cause notice was signed on 4 -9 -2011. Under these circumstances, claim of the ld. Counsel that payment was made before receipt of show -cause notice can be accepted. Next question that arises is whether intention to evade payment of duty can be sustained and extended period could have been invoked in this case or not. The ld. Counsel submits that this was a mistake on their part to have availed the credit. The concerned clerk made a mistake and when the audit party found it after four years they have paid the amount voluntarily with interest which is also substantial.