2026-VIL-1795-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Issuance of SCN where Cenvat credit is reversed and tax under Reverse Charge Mechanism is paid with interest before SCN - Section 73(3) of Finance Act, 1994 - Audit of the Appellant's books for the relevant period revealed inadmissible Cenvat credit availed on car hire and health insurance charges and non-payment of Service Tax under Reverse Charge Mechanism on certain services - Whether the SCN was required to be issued when the Appellant had reversed the credit and paid the tax with interest before its issuance - HELD - The Appellant had taken Cenvat credit wrongly and reversed the same along with interest before issuance of the SCN. The tax liability under Reverse Charge Mechanism was likewise discharged and intimated to the Department before the SCN. In these circumstances the SCN was not required to be issued to the Appellant in terms of Section 73(3) of the Finance Act, 1994. The impugned proceedings are therefore not sustainable against the Appellant and are void ab initio - The impugned order is set aside and the appeal is allowed - Imposition of penalty under Section 78 of Finance Act, 1994 where payment is made under Section 73(3) before SCN - Absence of willful misstatement or suppression of facts - The Appellant paid the Service Tax and interest at the instance of the Department before the issue of SCN and intimated such payment to the Department. Penalty under Section 78 was nevertheless imposed on the ground of deliberate suppression of facts with intent to evade payment of Service Tax - Whether penalty under Section 78 can be imposed on the Appellant - HELD - For the removal of doubts, it is declared that no penalty under any of the provisions of the Act or rules made thereunder shall be imposed in respect of payment of Service Tax under Section 73(3) and interest thereon. If payment is made under Sub-section (3) of Section 73, whether suo motu or at the instance of the Department before issue of the SCN, and such payment is intimated to the Department, no penalty under Section 76, Section 77 or Section 78 can be imposed. Further, no evidence of deliberate short payment was adduced in the SCN, and no conclusive findings were recorded in the Order-in-Original and the impugned order with respect to willful misstatement or suppression of facts. Imposition of penalty under Section 78 is therefore unwarranted and bad in law - The penalty is set aside and the appeal is allowed - Invocation of extended period of limitation - Suppression of facts - The adjudicating authority invoked the extended period of limitation under the proviso to Section 73(2) of the Finance Act, 1994 to confirm the demand of Service Tax under Reverse Charge Mechanism and the recovery of Cenvat credit on the allegation of suppression of facts - Whether the allegation of suppression and the invocation of the extended period can be sustained - HELD - The issue is covered by the decision of the Hon'ble Supreme Court, which held that the allegation of suppression and invocation of the larger period cannot be sustained when all relevant facts are well within the knowledge of the Authority. The issue is also squarely covered by a decision of this Tribunal, which has been affirmed by the Hon'ble Calcutta High Court. No evidence of willful misstatement or suppression of facts is adduced in the SCN or recorded in the impugned order - The impugned order is set aside and the appeal is allowed.
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