SUDHAKAR POLYMERS LTD. Vs. CCE

JUDGEMENT

(1.) M /s. Sudhakar Plastic Ltd., Hyderabad has filed this appeal seeking to vacate the impugned order vide which the Commissioner(Appeals) affirmed an order of the original authority demanding the wrongly availed cenvat credit of Rs. 1,09,366/ - along with applicable interest and imposed equal amount of penalty under Cenvat Credit Rules, 2004 and another penalty of Rs. 10,000/ - under Sections 76 and 77 of Finance Act, 1944. The facts of the case are that the appellant had paid service tax of Rs. 1,09,366/ - under the category C&F Agent for services rendered during the financial years 2004 -05 and 2005 -06(upto 9/2005). The assessee paid the above amount of service tax due at the instance of the Department. Subsequently, the assessee took cenvat credit of the service tax paid on the belief that they were not liable to pay the tax already paid. The departmental officers tentatively found that such availment of cenvat credit was illegal. Accordingly after due process of law, the original authority demanded the cenvat credit of service tax irregularly taken under Rule 14 of the Cenvat Credit Rules, 2004 along with applicable interest. Equal amount of penalty was imposed under Rule 15(4) of Cenvat Credit Rules. A total penalty of Rs. 10,000/ - was imposed under Sections 76 & 77 of the Finance Act, 1944. The appellants have already paid the wrongly availed cenvat credit along with due interest on 24/3/2008.

(2.) IN the appeal filed before the Tribunal as well as during hearing, the appellants have argued that neither the show cause notice nor the orders of the lower authorities indicated that the appellants had taken wrongly cenvat credit by reason of fraud or collusion, willful mis -statement, suppression of facts or contravention of any of the provisions of Finance Act or rules made thereunder with intention to evade payment of service tax. It is submitted that in order to impose penalty under Rule 15(4) of the Cenvat Credit Rules, it was imperative that the appellant was found to have availed cenvat credit by reason of fraud, collusion, willful mis -statement, suppression of facts or contravention of any of the provisions of Finance Act or rules made thereunder with intention to evade payment of service tax. The show cause notice did not allege any such fraud, collusion etc. on the part of the appellants nor was there any such finding in the order of the original authority or in the impugned order. In the circumstances, equal amount of penalty imposed on the appellants was liable to be set aside. As the proceedings were to recover wrongly taken cenvat credit, provisions of Section 76 & 77 of the Finance Act were not attracted. The impugned order deserved to be set aside.

(3.) I have carefully perused the case records and the rival submissions. The charge found against the assessee is that it had wrongly availed cenvat credit of an amount of Rs. 1,09,366/ -. The lower authorities have passed orders demanding the said amount under Rule 14 of Cenvat Credit Rules in accordance with law. The appellant has already paid the above amount of service tax along with applicable interest. Equal amount of penalty has been imposed invoking provisions of Rule 15(4) of Cenvat Credit Rules. I find that as rightly argued by the appellant, penalty can be validly imposed under these provisions in the following circumstances as per Sub -rule (4) of Rule 15, which is as under.